September 11, 1984 CONGRESSIONAL RECORD-SENATE 24737 SENATE-Tuesday, September 11, 1984
The Senate met at 9:30 a.m., on the RECOGNITION OF THE ACTING ing bill would be taken down today, expiration of the recess, and was MAJORITY LEADER that these are alternatives. called to order by the Honorable The ACTING PRESIDENT pro tem Mr. PROXMIRE. I thank the Sena DANIEL J. EvANs, a Senator from the pore. Under the previous order, the tor. State of Washington. acting majority leader is recognized. Mr. WARNER. But I would not in any way suggest that I know of a PRAYER reason or the majority leader knows of a reason why we should not proceed in The Chaplain, the Reverend Rich SENATE SCHEDULE Mr. WARNER. Mr. President, the an orderly course to the consideration ard C. Halverson, D.D., offered the fol of S. 2851. lowing prayer: majority leader, Mr. BAKER, is at this time at the White House conferring Mr. PROXMIRE. Mr. President, I Let us pray. with the President and others. thank my good friend from Virginia, Father in Heaven, we pray for the 28 The calendar for this morning's ac and as a member of the Banking Com Senators up for reelection, over whom tivities provides leadership time of 10 mittee, and as one managing the bill hangs the heavy responsibility for minutes each, followed by a special on the minority side, I earnestly hope their campaigns while the Senate con order for Mr. PRoXMIRE, the Senator that the Senate will stay with the tinues in session. They do not cam from Wisconsin, of 15 minutes; there banking bill. It is a very important bill. paign because it is fun-they campaign after, morning business until 10 a.m. Senator GARN has put a tremendous because they must-our political with 2 minutes to each Member of the amount of work into it. I have some system requires it. You know their Senate seeking such recognition. At 10 very serious reservations about parts hearts Lord, how difficult it must be o'clock we will resume the pending of the bill, and I hope we can change to concentrate on Senate business business, which is the Baker motion to it. But it is a bill that is absolutely when circumstances at home compete proceed to consideration of S. 2851 vital to our financial community if. we under cloture. From 10 a.m. to 11 a.m. are going to get it passed, and I think for their attention. You know how most Senators, whether they are on great the temptation Lord, to abdicate the time will be controlled by the Sen ator from New York [Mr. D'AMA.To]. the Banking Committee or not, are responsibility in the Senate and con aware of the very great importance of centrate on the constituency. Thank From 11 a.m. until 11:30, the time will be under the control of Senators GARN that bill. you, gracious God, for public servants Mr. WARNER. Mr. President, if the who refuse to yield to such temptation and PRoXMIRE. At 11:30 a.m.. there will be a vote on the motion to proceed distinguished Senator from Wisconsin and at some political risk fulfill the will yield for a moment, prior to the obligation for which the people sent with S. 2851, the yeas and nays having been ordered. convening of the Senate this morning them to Washington. I was privileged to hear the senior Sovereign Lord, help the people to The leadership has yet to obtain unanimous consent to recess from 12 Senator from Wisconsin [Mr. PRox understand the dilemma which our noon to 2 p.m. today. but I anticipate MIRE] mention his observation with re system imposes upon incumbent Sena that that will be done as is the custom. spect to the vote yesterday. I wonder tors at such a time as this. May the At 2 o'clock we will go back to the if the Senator would be willing to electorate be reminded that though banking bill, S. 2851. share that with our colleagues. I was our system has many problems it is I am told should this matter not be very much impressed by the Senator's still the best in the world. We pray in considered by the Senate today fur observations. the name of Him in whom is all power ther, that the majority leader has in Mr. PROXMIRE. Mr. President, I in Heaven and on Earth. Amen. mind television in the Senate, or sever have been in the Senate a long time. I al appropriation bills. cannot recall a time when the Senate I am informed that the Labor-HHS so decisively invoked cloture. Usually APPOINTMENT OF ACTING and the Interior matters are available it is fairly close, and most of the time PRESIDENT PRO TEMPORE for floor consideration. when we invoke cloture we do not get The PRESIDING OFFICER. The Mr. President, at this time I yield to it on the first vote. But yesterday, as I clerk will please read a communication the acting minority leader. recall, there were I think 3 votes to the Senate from the President pro The ACTING PRESIDENT pro tem against cloture. Perhaps the people tempore [Mr. THuRMoND]. pore. The acting minority leader is rec who keep the records can cite an in The legislative clerk read the follow ognized. stance in the last 27 years when we ing letter: Mr. PROXMIRE. Mr. President, will have had that small of a number. But U.S. SENATE, the distinguished Senator from Virgin I cannot remember it. I think what PREsiDENT PRO TEMPORE, ia yield for a question? that means-! hope it means-is that Washington, DC, September 11, 1984. Did the Senator indicate that we the Senate is determined to go ahead To the Senate: would move to another bill? I think he with this bill right or wrong recogniz Under the provisions of rule I, section 3, specified television in the Senate in ing that many Senators will vote of the Standing Rules of the Senate, I the event we finish the banking bill or against the bill, and many Senators hereby appoint the Honorable DANIEL J. that we would move off the banking will vote for major changes in the bill, EvANs, a Senator from the State of Wash bill at some time. but that the Senators as a whole rec ington, to perform the duties of the Chair. Mr. WARNER. Mr. President, I was ognize this is a bill that we should not STROM TlroRM:OND, President pro tempore. simply informed by the majority lead permit to be delayed indefinitely. We er's office that in the event it is the only have a few days left, as the Sena Mr. EVANS thereupon assumed the decision of the leadership for some tor from Virginia knows. It is a time chair as Acting President pro tempore. reason unknown to me that the bank- that invites delay and filibusters for
e This .. bullet" symbol identifies statements or insertions which are not spoken by the Member on the floor. 24738 CONGRESSIONAL RECORD-SENATE September 11, 1984 those who would kill legislation. But I Religious activities seem especially an outside, ball-park estimate of the earnestly hope it means that the threatening to the Castro regime; ultimate cost. They tell us they will Senate really means business on this thus, the government enforces an ask for $25 billion over the next 5 one. active antireligious policy. years, not to build or deploy a defen Mr. WARNER. Mr. President, I Among the restrictions on religious sive system but-just to make a begin thank the distinguished Senator from practice enforced by the Cuban Gov ning estimate of the costs. We will Wisconsin. I think those observations ernment are discrimination against re spend more than $50 billion before we will be of value. ligious believers in educational and buy a single item of hardware for de Mr. President, I yield back the bal employment opportunities, prohibi ance of my time reserved for the ma tion on religious media, and restriction ployment, let alone deploy even a frac jority leader. on the construction of new churches. tion of the system. We do know the ul Political meetings and work obliga timate cost of going ahead with the tions are regularly scheduled to con full program will be immense. It will RECOGNITION OF THE ACTING flict with religious observances. The be continuing. It will grow very rapidly MINORITY LEADER July 26 national holiday, commemo each year. And that growth will be The ACTING PRESIDENT pro tem rating the attack on Batista's Mon hard, maybe impossible, to resist. As pore. Under the previous order, the cada barracks in 1953, has been pro U.S. News & World Report said, the acting minority leader is recognized. moted as a replacement for Christmas, main persuaders for the Congress to Mr. PROXMIRE. Mr. President, I and the availability of toys for chil continue to spend money on the pro ask unanimous consent that the time dren has been limited to the 26th of gram will not be the defense experts. allocated to the minority leader under July period to the exclusion of Christ It will be the firms that would receive the standing order be reserved for his mas. Similarly, Holy Week observ hundreds of billions of dollars in con use if he chooses to use it later in the ances are preempted by the weeklong tracts, the unions whose members will day. celebration of the battle of the Bay of have hundreds of thousands of jobs, The ACTING PRESIDENT pro tem Pigs. and the Members of the House and pore. Without objection, it is so or For whatever reason, the Castro Senate who represent these workers. dered. regime does feel threatened by reli Star Wars, once we start it, will gious expression. This is a similar fear become the next thing to an irresisti CASTRO'S BROKEN PROMISE that was no less real to Hitler's regime ble force. For every big spending pro concerning Jews, or Pol Pot's regime gram the Congress has started and Mr. PROXMIRE. Mr. President, in Cambodia concerning the urban ended when it turned out to be waste since Fidel Castro led a successful rev masses, or the Turks' fear concerning ful, at least a hundred have continued olutionary movement to overthrow the the Armenians during World War I. on their wasteful way. But there is an repressive Batista regime in 1959, I am not suggesting that Castro's other reason far more important than Cuba has played a major, controver policies constitute genocide, but they its cost that represents the prime sial role in international affairs. may create an environment that is reason why we should not fund it: It Whether it is assisting guerrilla insur conducive to the crime of genocide. will kill any real prospect for arms gencies in Central America or sponsor That is why I urge the Senate to control. ing 25,000 Cuban troops to support a ratify the longstanding Genocide Con On June 20, the Washington Post re Marxist regime in Angola, the govern vention. This will show our resolve ported that an organization of security ment of Fidel Castro contends that it against any future genocide. And the and arms control experts have started is promoting justice and freedom for United States will send a clear mes a national campaign to save arms con oppressed people throughout the sage abroad that we will not tolerate, trol and specifically the antiballistic world. from anyone, the act of genocide missile treaty by stopping funding for But in putting Cuba's global activi against a whole national, racial, ethnic Star Wars. Mr. President, the compe ties into proper perspective, it is im or religious group. portant to understand to what extent, tence of this panel should lead every if any, Fidel Castro's government has Senator to question the wisdom of pro effectuated meaningful democratic HOW STAR WARS THREATENS ceeding with the beginning of these and social reforms in Cuba and ad NUCLEAR ARMS CONTROL colossal appropriations for carrying hered to internationally recognized Mr. PROXMIRE. Mr. President, this the nuclear war into space. The sup principles of human rights. The evi Congress has advanced the President's porters of the antiballistic missile dence shows that the promises made Strategic Defense Initiative or Star treaty on this panel include two to the Cuban people by the Castro Wars proposals by providing about former Directors of the Central Intel government have not been realized. two-thirds of the funds he requested ligence Agency: Stansfield Turner and Moreover, in order to maintain its con in the armed services authorization William Colby. trol and power over the Cuban people, bill. Later this year, before we go out, I think all of us have recognized that the Castro government actively en presumably, we will have another shot the people who direct the CIA have gages in acts of torture and ha at "Star Wars." That will come when the clearest kind of understanding of rassment as well as other drastic steps we vote on the defense appropriations the real threat the Soviet Union repre to suppress any activity that might be bill if we do, and I hope we can. A sents to this country. construed as threatening the estab great deal will be at stake on this Colby and Turner are hardheaded, lished regime. "Star Wars" antimissile vote. The ulti realistic experts on the Soviet Union, Executions to discourage political mate cost of this system will certainly its strength, and its potential. Both dissent, for example, which began b~ in the hundreds of billions and very have had the unparalleled advantage when Castro seized power in 1959, con possibly more than $1 trillion. This of directing this country's Central In tinue throughout 1984. There are comes at a time when Federal spend telligence Agency whose principal task credible reports of summary execu ing and colossal Federal deficits con is to develop a thorough understand tions following secret trials of civilians stitute the single most serious threat ing of the Soviet security threat to for alleged political offenses by mili to our economic health. This SDI pro this country and every deep and devi tary tribunals. A member of Jehovah's gram carries far and away the single ous aspect of that threat. The panel Witnesses, for example was reported biggest and most explosive challenge also includes retired Army Gen. Max to have been executed in August 1983 we will face to fiscal responsibility. well Taylor and former Defense Secre for allegedly spreading propaganda to Think of it: The strongest advocates tary Robert McNamara, two veteran incite armed rebelllon. of this program will not even give us experts with as profound an under- Septembe,- 11, 1984 CONGRESSIONAL RECORD-SENATE 24739 standing of defense requirements as to provide funds for the new defensive comprised the sample group, and rep we have in this country. system that would be partly based in space. resented 12 percent of eighth-grade The campaign's 46 sponsors include students and 10.5 percent of the high The ABM treaty supporters also in former President Carter, former secretary clude Gerard Smith, who served Presi of state Dean Rusk, former defense secre school seniors. dent Nixon as his principal arms con tary Robert S. McNamara, retired Army Mr. President, the results of this trol expert and was the chief arms ne Gen. Maxwell D. Taylor and former CIA di survey are disturbing, at the very gotiator at the time President Nixon rectors Stansfield Turner and William E. least. For example, the majority of signed the ABM treaty. This country Colby. eighth-graders, 67 percent, indicated has no more seasoned or respected If the new strategic defensive system is that they had used alcohol at some arms control expert than Gerard deployed, it will intensify the nuclear arms race with the Soviet Union and lead to dec time in their lifetime; 1 out of 4 re Smith. And what does Smith say ades of nuclear instability, the group con ported having used marijuana at some about the "Star Wars" missile defense tends. time. Almost 3 out of every 10 re system? The Post reports that Smith Signed by President Richard M. Nixon spondents indicated that they had is convinced that funding this system and the late Soviet President Leonid I. tried dangerous inhalants; and half will "destroy arms control efforts." Brezhnev, the 1972 ABM treaty bans all the students surveyed said they had The Post quotes Smith as saying: "It space-based ABM systems or any nationwide smoked cigarettes. It was estimated seems we are on a slippery slope. We defense against missile attack. The theory is that the best preventive against nuclear war that as many as 208 eighth-graders are already in an anticipatory breach were in need of intensive treatment kill is the knowledge that it would be mutually of contract." Smith would not all destructive. for problems related to dally use of al research on advanced ABM systems. The treaty's supporters say its ratification cohol and/ or marijuana, and another He and the rest of the group that paved the way for all subsequent negotia 504 may be "problem drinkers" or would preserve the ABM treaty favor tions aimed at reducing U.S. and Soviet nu "smokers" in need of professional such research. They oppose the actual clear arsenals. help. development and deployment of a Gerard C. Smith, the chief U.S. arms ne space-based ABM system. Obviously, gotiator at the time the ABM treaty was In describing the amount of usage of such a "breakout" would clearly vio signed, said at a news conference at the Car inhalants by the students, it was late the 1972 ABM treaty. negie Endowment for International Peace stressed that studies show that sniff that he believes-as he did in 1972-that the As a matter of fact, anyone who had ing such substances as gasoline, glue, deployment of an effective, nationwide or industrial solvents can cause irre the chance to watch the Star Wars ABM system by one superpower would program on NBC on Saturday night versible brain, liver, and kidney produce irresistible pressure on the other to It heard the Secretary of Defense con deploy enough missiles to penetrate it. damage even after a single use. was cede as much. Secretary of Defense That would lead to a tremendously in estimated that about 7 million individ Weinberger conceded, in a discussion creased arms race that would destroy arms uals have experimented with inhal with former Secretary of Defense control efforts, Smith said. "It seems to me ants, most being under 20 years of age; McNamara, that the ABM treaty we are on a slippery slope," he said. "We are 27 percent of the students surveyed in would undoubtedly be violated. But he already in an anticipatory breach of con this Pinellas County study reported said the conditions have changed, as if tract." having used inhalants at some time, Smith, a former director of the Arms Con and an additional 15 percent said they that was the reason to do so. trol and Disarmament Agency, said the So the Congress must handle this re group leading the new campaign favors con expected to use inhalants within the search very carefully and with scrupu tinuing research on advanced ABM systems next year. lous regard for the terms of the ABM as a hedge against a possible Soviet "break Study of the attitude of these stu treaty. We must also find the strength out" from the terms of the 1972 accord. dents toward substance abuse revealed to resist the immense pressures that "What we are objecting to is an American a liberality indicating an astounding the hundreds of millions we spend on breakout," by the actual development and ignorance of the dangers of drugs and research will put on the Congress to deployment of a space-based ABM system. alcohol; 8 out of every 10 students in move to the first development that he said. dicated approval of alcohol use; over would put this country in violation of half the students reported that they the antiballistic missile treaty. We are ROUTINE MORNING BUSINESS approved of marijuana use; and 4 out a few inches from the "slippery slope" The ACTING PRESIDENT pro tem of 10 students cited approval of having to which Gerard Smith referred. Once pore. Under the previous order, there five or more drinks on the weekend. It we slip over the slope and begin to de will now be a period for the transac was found that as many as 8 percent velop antimissiles, the antiballistic tion of routine morning business not of the students used marijuana on a missile treaty will be dead. And effec to extend beyond the hour of 10 a.m. daily or weekly basis; and almost 13 tive arms control with the Soviet with statements limited therein to 2 percent of the students surveyed indi Union will be a terminal case. minutes each. cated they had been drunk more than Mr. President, I ask unanimous con three times in the 2 weeks prior to the sent that the article from the Wash survey. ington Post of June 20, headlined: OPERATION PAR, INC. Mr. President, these and the other "U.S. Close to Violating ABM Treaty, Mrs. HAWKINS. Mr. President, a statistics provided in this study are, as Panel of Security Specialists Says," be very impressive, thorough, and dis I said, disturbing, but it becomes even printed at this point in the RECORD. turbing, research study was recently more upsetting with the final conclu There being no objection, the article released by an organization in my sion of the study. And this is that the was ordered to be printed in the home State of Florida known as Oper Pinellas County youth observed in this RECoRD, as follows: ation PAR, Inc. study are statistically less approving [From the Washington Post, June 20, 19841 In "Substance Abuse Among Pinel of substance use than the national av U.S. CLoSE TO VIOLATING ABM TREATY, las County Youth: A Summary of erage, and less exposed than the na PANEL OF SECURITY SPECIALISTS SAYS Findings," Operation PAR, Inc., re tional average. By pushing development of its "Star veals simply, clearly, and shockingly, Mr. President, we must continue in Wars" missile defense system, the Reagan the amount of substance abuse which our efforts to educate our young administration is close to a clear U.S. viola occurs in the middle and high schools people to the dangers of drug and al tion of the 1972 ant1-ball1st1c missile treaty, a panel of security and arms control of a typical American school system. cohol abuse. Our children are begin specialists sald yesterday. This is the second of two surveys of ning to experiment with drugs at a The panel is beginning what lt calls a "na drug use among Pinellas County younger age, are using drugs more tional campaign to save the ABM treaty" by youths, the first having been conduct often, and are ingesting a wider varie attempting to persuade Congress to refuse ed in June 1980. Over 1,500 students ty of drugs. We must continue to do 24740 CONGRESSIONAL RECORD-SENATE September 11, 1984 all we can to prevent our young people The bill clerk proceeded to call the Are we really going to make New from becoming victims of our Nation's roll. York stand for badness through legis No. 1 problem, substance abuse. And I Mr. D'AMATO. Mr. President, I ask lation? We should not. How can Sena would like to commend Operation unanimous consent that the order for tors do this and still say they protect PAR, Inc., for this fine study which the quorum call be rescinded. the Constitution. But while doing this will contribute much to these efforts. The PRESIDING OFFICER Federal Reserve because they are seeking an edge. I ing the consumer. What we are doing Board would say that they are in favor is saying that we are going to give you of this legislation. It has no redeeming think maybe we ought to get away a turf and that is your turf. That is features whatsoever. The only thing from the use of that term "greed" We your turf in New England and your people can say is, "Oh, we are begin want to say people are looking for an turf in Middle Atlantic and your turf ning to break down the Douglas advantage. They are looking to protect out in the Far West. But New York, amendment. We are beginning; it is a their position. they are not going to be allowed to step forward." What is the ABA doing? Are they come in for any reason. That makes Well, if it is a step forward, then ev really advancing sound banking by good politics when you go back be- eryone should be entitled to the same supporting title X? I do not think so. cause your State legislators all like it rights. No one should be excluded. How is that? Why would you not want and they are connected to the banking And, therefore, we really duck the un to discourage th~ largest banks in this lobbies. That is wonderful; you talk derlying issue of interstate banking. Nation from participating interstate. about greed. They keep their little So I do feel strongly about this. It Why? What attempt has been made to area sacrosanct. No competition. may be perceived that my opposition see to it that they are reasonably regu What about the stockholders of may be unreasonable as it relates to lated as opposed to being discriminat those little banking institutions? Have the length of time that I have spoken. ed and excluded against? None. we protected them? What about the I make no pretense about it. The bill I have not seen any legislative en consumers? Has this legislation en- in its form should be killed. I do not deavors, any actions, nor any hearings hanced their ability to get more com- make any apology for that. That is looking at title X to say that we will petition? Well, you could say, "It is a why I was elected, to come here and to attempt to fashion a bill that will pro first step." I do not think it is a first fight for. To see to it that the State of tect legitimately the rights of the step except one backward. New York is not discriminated against. small banks, the rights of a region not Should this Congress of the United This is a discriminatory bill as it re to be inundated, and to see to it that States be moving in this manner when lates to the banking institutions of we have a diversity in the system that we read the Constitution and see that New York. everyone wants to see. this legislation really flies in the face If you are a bank in London, you If you ask the Treasury people of the commerce clause and the equal may be able to get permission to go whether title X should stand, they protection clause? Could you say into any other State in this Nation. An would tell you were it not for the fact under the States rights doctrine, some- Italian bank can come in, go into Con that they are looking for the total bill how what we are doing is ratifying the necticut. You can go into New Jersey that it should not. If you were to ask rights of the States to undertake this or go into Pennsylvania. But a bank the Federal Reserve and the regula in spite of the fact it flies in the face from New York will not be permitted tors whether or not this makes good of other parts of the Constitution? I to do that. That is absurd. sense, they would tell you it does not. do not believe even under the most · I do not know. Are any foreign It is political expedience. ardent believers of States rights would banks less fearsome in their competi Why do I say that? I am not suggest ever suggest that is correct. · tion, less aggressive in their manage- ing to you, by the way, that there may Now you might say, "Well, maybe ment? not be good parts of this bill that most the Congress has the right to adopt I do not know eventually what the of us can agree upon and there are this legislation and when this matter Supreme Court of the United States is goes before the Supreme Court of the going to say about title X. I do not those who say let us close the South United States maybe they will ratify really believe they can allow those re Dakota loophole. We can all agree it; maybe they will find it unconstitu- gional compacts to stand. upon it. Well, should passage of this tional." I imagine some great legal scholars entire bill or title X really be a re Who is there to talk about fairness? will be arguing those cases, and the quirement for dealing with the obvi I hear a lot about fairness. I read great law firms of our Nation will be ous failures of current regulation? I do about it every day-the fairness issue. putting together the various attacks not want to be accused of failure to ad Well, just because you are big does not and defenses on that statute. They dress the nonbank bank loophole. mean that you should be discriminat- will have different interpretations. So I am going to put forth a dis ed against. My banks are not perfect. But certainly as I see it, this flies in claimer. I am not going to take respon But that does not mean Congress the face of the Constitution. Our ac sibility for defeating these provisions. should discriminate against them. tions at the very least indirectly at They are sound provisions. But title 10 They have at least the same right as tempt to ratify that which our forefa taints an otherwise sound bill. Title 10 anyone else. Because you are big does thers and the Framers of the Consti has destroyed the consensus. not mean you can go ahead and dis- tution would have been shocked about. So there are areas that just about criminate against them. Indeed, they took great time and were every Member in this Chamber can And for the life of me I wonder why careful in spelling out that they did agree upon should be dealt with. Let we would permit foreign banks to not and would not countenance. But us deal with them. Let us deal with enter the country but not New York no. We go and interfere with free com them. banks. No one has really addressed merce. So I say here and now that this is a that question suitably. And the admin- We do it in such a manner that we Senator who is willing to compromise, istration, notwithstanding the letters can say, oh, well, we are helping the who is willing to examine the problem that were circulated yesterday, they States, and we are saying that those with title X. I believe we should look have not really supported S. 2351. States who want to join these com at how to proceed to deal with inter They have come onboard because they pacts can do it. And New York, if you state banking. I might add that inter have a different agenda. They want get into one, that is fine. That is OK. state banking is happening. Why stop the banking institutions to get ex- But, of course, we understand the the process? We should continue it. 24742 CONGRESSIONAL RECORD-SENATE September 11, 1984 It would seem to me that, before the American Banking Association was ing of checks for a couple of weeks and hour gets late and tempers begin to one of those that should not have what that does to depositors and the get frayed, an examination of how to been included in the position with availability of their funds. We are cor not discriminate against the banks of Citicorp and Chase Manhattan. recting some problems there as well. California and New York would be ap Let me just say once again what has But the securities industry and big propriate. been repeated several times on this banks in New York say, "We don't I would not attempt to filibuster floor, and very eloquently by my col care about that, we don't care about those provisions dealing with securi league from Wisconsin yesterday, consumer protection." They do not ties powers. Let's vote on those provi about a major part of this bill and why care about all these other titles that sions. Let the bill of the Senate pre I guess I am surprised that a couple of have been referred to by both the vail. banks and the securities industry ranking minority Member and I as However, having said that, I will try would say, "If we cannot be guaran noncontroversial. I just thought it and kill the bill because of title 10. teed that we have our way on the pro might be useful to my colleagues Any Senator would do the same if it visions we do not like, we will kill the before we vote to proceed with this bill discriminates against New York. entire bill." I think it might be useful to know if we do not get it up and pass I would hope that maybe at this to point out what some of those other it, regardless of how we resolve the time that we might be able t'o fashion parts are and what they are doing. a vehicle that would permit this Sena When I called them greedy, I meant four controversial issues by a vote of tor simply to allow the bill to pass. To it-1 repeat it again today-because of the Senate, what is going to be tossed do this, let's strike title 10. their willingness to come out on the out and why I have continually said I have not undertaken a filibuster in floor and have those who favor their that if we could not have a compre the past. I hope that the necessity for position argue in favor of that posi hensive bill, there would be no bill. me doing it in the future would be tion. In the case of title X, I under Never have I said it had to be my bill nonexistent and at the very least lim stand why the Senator from New York exactly intact but a comprehensive bill ited. I do look forward to filibustering. does not like title X. I understand why and not simply a loophole closer, be But I have an obligation to my people. those banks do not like title X. But we cause the House bill is not even ad Mr. President, I suggest the absence can certainly resolve that issue on the dressing many of these things. I do not of a quorum. floor by debating the substance of know why. There has been a lot of The PRESIDING OFFICER. On that title and having an up or down rhetoric that we ought to do some whose time? vote by the Senate. thing about check-cashing policies and Mr. D'AMATO. On my time. But there are 11 titles to this bill. so on. In the same section we have The PRESIDING OFFICER. The We have not discussed any of them. civil liability, effect on check accept clerk will call the roll. All we have talked about is title X pri ance policies and other laws. Most The legislative clerk proceeded to marily. But we have amendments to people probably do not know this is all call the roll. the Federal Reserve Act that are not in here. All we have been talking Mr. GARN. Mr. President, I ask controversial, amendments to the Na about is regional banking and munici unanimous consent that the order for tional Housing Act that are not con pal revenue bonds, mortgage bank se the quorum call be rescinded. troversial, amendments to the Home curities and the South Dakota loop The PRESIDING OFFICER to authorize depository in Mr. STEVENS. I announce that the stitution holding companies to engage in without having to attack all these Senator from New Mexico [Mr. Do other provisions indirectly about certain activities of a financial nature and in MENICI] and the Senator from South certain securities activities. to provide for which they are not necessarily con Carolina [Mr. THuRMoND] are neces the safe and sound operation of depository cerned. sarily absent. institutions, and for other purposes. Mr. PROXMIRE. Mr. President, I I further announce that, if present The Senate proceeded to consider spoke yesterday on this issue that is and voting, the Senator from South the bill. before us now, whether we should take Carolina [Mr. THuRMoND] would vote up the bill, and I will not repeat "yea." myself, except to say that I think the Mr. CRANSTON. I announce that RECESS UNTIL 2 P.M. committee has done a whale of a lot of the Senator from Michigan [Mr. Mr. BAKER. Mr. President, today is work on this bill. Most of it is noncon LEviN] is necessarily absent. troversial. It does have the great ap Tuesday. There are caucuses of both I further announce that, if present parties away from the floor of the proval of the people the Senator from and voting, the Senator from Michi Utah so clearly and persuasively Senate. I ask unanimous consent that gan [Mr. LEviN] would vote "yea." the Senate now stand in recess until argued support it, including the banks, The PRESIDING OFFICER. Are the savings and loan institutions, the the hour of 2 p.m. today. there any other Senators in the Cham There being no objection, the credit unions, the Governors, the regu ber who desire to vote? lators, the administration. He is right. Senate, at 12 noon, recessed until 2 The result was announced-yeas 95, p.m.; whereupon, the Senate reassem The only real opposition to this bill is nays 2, as follows: very limited, and I think they have a bled when called to order by the Pre strong case for their position. [Rollcall Vote No. 233 Leg.] siding Officer [Mr. GORTON]. Certainly, this Senator does not ap YEAS-95 Mr. GARN. Mr. President, I suggest prove every part of this bill. I have Andrews Durenberger Johnston the absence of a quorum. several amendments I intend to offer, Armstrong Eagleton Kassebaum The PRESIDING OFFICER. The and I hope I can win support for them. Baker East Kasten clerk will call the roll. Baucus Evans Kennedy The bill clerk proceeded to call the This certainly is not the kind of bill Bentsen Exon Lautenberg that should be killed outright. If it Biden Ford Laxalt roll. were killed outright, I think the finan Bingaman Gam Leahy Mr. GARN. Mr. President, I ask Boren Glenn Long unanimous consent that the order for cial situation of this country would be Boschwitz Goldwater Lugar in very serious straits. We need stron~ Bradley Gorton Mathias the quorum call be rescinded. financial institutions, independent fi Bumpers Grassley Matsunaga The PRESIDING OFFICER. With nancial institutions, locally owned fi Burdick Hart Mattingly out objection, it is so ordered. Byrd Hatch McClure nancial institutions. We need institu Chafee Hatfield Melcher tions that are not involved in a whole Chiles Hawkins Metzenbaum series of conflicting areas. Cochran Hecht Mitchell FINANCIAL SERVICES Cohen Heflin Moynihan COMPETITIVE EQUITY ACT 1 think this bill does a reasonable Cranston Heinz MurkowskJ job of trying to prevent the most seri Danforth Helms Nickles The Senate resumed consideration ous problems that have developed in DeConcini Hollings Nunn of the bill. Denton Huddleston Packwood Mr. GARN. Mr. President. I thank recent years. This year. with only two Dixon Humphrey Pen thirds of the year gone, we have al- Dodd Inouye Percy my colleagues for allowing us to final- ready had more bank failures than Dole Jepsen Pressler ly get this bill up for consideration September 11, 1984 CONGRESSIONAL RECORD-SENATE 24745 after 5 days of discussing it but not ac examined fully, the Banking Commit Dakota insurance loophole. It author tually having it before the Senate. tee, during this Congress, has held 34 izes depository institution organiza Mr. President, the financial services days of hearings and received testimo tions, through separate nondepository sector of our economy is in the midst ny from 248 witnesses representing affiliates, to engage in conservative, of rapid evolution. regulatory agencies, consumer and safe and sound securities activities The phasing-out of Regulation Q labor groups, trade associations, and which are closely related to the tradi controls is benefiting consumers, but it other interested persons. The Banking tional business of depository institu is also raising the costs of doing busi Committee's printed hearing record on tions, specifically, authority to under ness for depository institutions. To these matters is 8,060 pages long. write mortgage-backed securities, com cover those higher costs, depository in S. 2851, the product of these exten merical paper, and all types of munici stitutions need new products to offer sive hearings, exhaustive analysis, and pal revenue bonds. In addition, the bill their customers. a thorough markup session, represents reaffirms existing securities authority At the same time that our tradition the appropriate legislative response to such as discount brokerage services al depository institutions are facing the issues raised by the rapidly chang and investment advisory services. It higher costs, they are also facing new ing financial services marketplace. allows a State to open its banking competition from diversified providers To give Congress time to study the market to institutions from other of financial services. issues raised by financial marketplace States in a particular region or, if the The last decade has brought enor developments and time to develop re State so chooses, to all other States. It mous changes in the financial services sponsible legislation, the Comptroller industry, largely because of improve of the Currency first imposed a mora establishes rules for the regulation of ments in the technology of delivering torium on granting charters for non brokered deposits. It tightens Federal services and imaginative new financing bank banks on April 5, 1983-17 law concerning credit card fraud and techniques. Throughout this period, months ago. consumer leasing. It provides for the banks and thrifts alone, among all the That first moratorium was sched payment of interest to depository in providers of financial services, have uled to expire on December 31, 1983, stitutions on reserves held only been subject to a regulatory structure but it was extended to March 31, 1984. against money market deposit ac created 50 years ago. I, among others, requested the Comp counts and super NOW accounts. It re Companies like Sears, Roebuck are troller of the Currency to do that. To quires depository institutions to dis in the forefront of this new competi give Congress even more time to act, close the waiting period before cus tion. Sears combines investment bank the Comptroller imposed a new mora tomers have access to funds deposited ing services-including deposit-like torium on May 9 retroactive to March by check, and it seeks to expedite the mutual fund services-with insurance 31. Again, I requested that he do that. check-clearing process. It reinstates a services, real estate services, and Sears The new moratorium runs until the Federal usury preemption to assure a Savings Bank. end of this Congress. continued availability of credit for the Most importantly consumers are Surely, Congress has been given ade business and agricultural sectors of voting with their dollars in favor of quate time to develop an appropriate our economy. the convenience offered by these new legislative response to the issues raised Now, let me summarize what the bill diversified competitors. by the evolution of our financial serv does not do. It does not expand the in These new competitors have capital ices marketplace. surance or real estate activities of ized on the limitations tt> which tradi As a matter of fact, at each time we bank holding companies or other de tional depository institutions are sub have had these moratoriums, I have pository institution organizations. ject. For the first time, we have insti received promises from many of my Statements regarding this point have tutions which operate as banks, but colleagues in the Senate that, by the been very misleading around the coun eschew the label of "bank," principally end of the moratoriums, they would be try. As a matter of fact, those authori to avoid statutory restrictions on their willing, able and ready to make deci ties were deleted from the bill before activities. It is time that banks and sions. So I am a little bit surprised we even went to markup. S. 2851 does thrifts be brought into the 1980's to when these 6-, 8-, and 10-month peri not permit depository institution orga compete with these new competitors, ods roll on and on. It is always just nizations to underwrite corporate through a few modest changes in the "give us another 6 months." It seems stocks or bonds. We are not proposing regulatory limits on their activities. to me that then it becomes a stall and a return to the combining of commer The financial services sector of our the promises of being willing to make cial banking and investment banking, economy also is being reshaped by decisions on these issues, regardless of and therefore, the bill certainly does market evolution. A major change has what those decisions finally turn out not undo the Glass-Steagall Act. With occurred in the municipal finance to be, were not as sincere as I had regard to expanded activities, we are market where revenue bonds have re hoped at the time they were given. proposing a few, simple, straightfor placed general obligation bonds as the S. 2851 is an appropriate legislative ward amendments to depository insti most important term-financing instru response. The legislation does not ad tution statutes to benefit consumers, ment for States and localities. dress all of the issues that I had hoped businesses, and local governments An equally significant change is oc to address, but it does take modest through increased competition in the curring in the mortgage finance steps forward that are significant. markets for municipal revenue bonds, market where the secondary mortgage It is a limited and modest proposal mortgage backed securities, and com market is rapidly growing in impor to give depository institution holding mercial paper, while reaffirming exist tance. companies a few of the abilities of ing securities authority such as dis Government at the State level is re their powerful competitors in the fi count brokerage services. sponding to this rapid evolution in the nancial services marketplace. These Mr. President, these securities activi financial markets. State legislatures additional services are extremely ties reflect the need to accommodate are acting on expanded powers for de narrow expansions of the authority of change in the financial marketplace. pository institutions and on expanded banks, and will promote competition, They are consistent with the purposes geographical markets for depository to the benefit of consumers, State and of the Glass-Steagall Act and with the institutions. local governments, and small business original exceptions to and periodic re It is now time for Congress to ad es, as well as banks. visions of that act. dress the issues. S. 2851 redefines the word "bank" in S. 2851 authorizes depository institu To ensure that the issues facing our the Bank Holding Company Act, tions to form securities affiliates that financial system and the legislation thereby closing the nonbank bank can underwrite municipal revenue dealing with such matters would be loophole. S. 2851 also closes the South bonds and deal in such bonds. This au-
a1 -oss o-87 -s iPt. 18> 24746 CONGRESSIONAL RECORD-SENATE September 11, 1981, thority for depository institutions will underwriting municipal revenue mortgage backed securities market ex bring new competition to this highly bonds. The support of the Board of pands. We must permit depository in concentrated market and, thereby, Governors of the Federal Reserve, the stitution securities affiliates to engage lower financing costs for States and Comptroller of the Currency, and in this vital activity which will do so local governments. FDIC for this power further evidence much to generate more mortgage cap I repeat what I said earlier today: that this is not a safety and soundness ital in the coming years of high the National League of Cities. the U.S. issue. demand. Conference of Mayors, the National Allowing depository institution secu Association of Counties, all the local rities affiliates to underwrite all types COIDIERCIAL PAPER municipal and county governments of of revenue bonds will save millions of Commercial paper is a term which the country support these new author dollars for cities and States and. most describes the short-term debt obliga ity for depository institutions because important, users of airports, highways, tions corporations issue to generate they believe the result will be lower and other public facilities. The munici operating cash. It is functionally iden cost of government in their local juris pal bond underwriting market is heavi tical to a commercial bank loan, but dictions. ly concentrated. In 1982, the top 10 the default rate has historically been This is accomplished through a very revenue bond underwriters, all of only a small percentage of that for modest expansion of the activities that which were securities broker1 dealers, commercial loans. Underwriting and depository institutions are permitted controlled nearly 50 percent of the distributing such instruments involves to engage in. Banks already under market. minimal risks. write and deal in general obligation We constantly hear about the fear The commercial paper underwriting bonds. Thus, they already have the in of concentrations, that we cannot market is very concentrated among se house expertise to perform the same allow the 10 biggest banks in this curities brokerI dealers: Seven invest activities in the closely related revenue country to control whatever they are ment banking firms currently act as bond marketplace. Equally important, supposed to control. But we fail to rec agents for over 85 percent of the cor underwriting and dealing in revenue ognize that the concentrations can porations which issue commercial bonds will not expose depository insti occur in other parts of the financial paper through an agent. Permitting tutions to any new type of risk. services industry as well. depository institution securities affili At the time of passage of the Glass-. So, I repeat: The municipal bond un ates to compete in this vital part of Steagall Act, municipal revenue bonds derwriting market is heavily concen our capital market, which is increasing were virtually· unknown. Yet, because trated. In 1982, the top 10 revenue more rapidly than the commercial of this accident of history. banks pres bond underwriters, all of which were loan market, is an effective manner of ently are prohibited from dealing in securities broker/dealers, controlled ensuring the continued participation these bonds, although they are just as nearly 50 percent of the market. In of depository institution organizations safe as general obligation bonds, and comparison, the top 10 general obliga in serving the short-term credit needs today constitute three-quarters of the tion underwriters, both banks and se of American businesses. total tax-exempt bond market. It is no curities firms, controlled only 29 per coincidence that the industries that cent of that underwriting market-a AMENDMENTS have opposed expanded bank powers great deal more competition. More During the Banking Committee's are the same people who today control over, the trend is toward more concen markup, two amendments were adopt this market. They do not want the tration in the revenue bond market, ed dealing with mutual fund authority competition. while the general obligation market is and insuranee authority. Who are the people who would becoming less concentrated. Increased The mutual fund amendment delet really be helped by giving banks this competition in the revenue bond ed authority for depository institution authority? Municipal revenue bond au market would result in reduced under securities affiliates to operate mutual thority for bank securities affiliates writing fees and improved services for funds. has been endorsed by the National public issuers. The insurance amendment applied Governors Association, the Municipal As a former mayor, I am especially title VI of the Gam-St Germain Fi Finance Officers Association. the U.S. aware of local financing needs and op nancial Institutions Act of 1982 to all Conference of Mayors, the National erations. After having served on the subsidiaries of bank holding compa League of Cities, the National Associa Banking Committee for almost 10 nies. I remain concerned over the tion of Counties, the American Public years, I am more convinced than ever impact of this amendment on States Power Association, and many other that Congress should authorize deposi rights and the dual banking system. municipal and State associations-vir tory institution securities affiliates to NONBANK BANKS tually everyone who has an interest in underwrite and deal in all types of mu S. 2851 preserves the coverage of the low-cost finance. Only those who have nicipal revenue bonds. Bank Holding Company Act by rede a comer on the market-three-fourths MORTGAGE BACKED SECURITIES fining the term "bank" under the act of the bond market of this country One of the clearest and most impor to cover all FDIC-insured institutions. are opposed to granting this new au tant needs that faces our Nation in By grandfathering "nonbank bank" thority. the next decade and beyond is meeting acquisitions occurring before July 1. Congress already has approved bank the huge demand for mortgage capital 1983, the bill recognizes that these underwriting of certain municipal rev that all experts project. Estimates are early acquisitions were made in good enue bonds, such as those issued by that we will need $1.5 trillion to fi faith before Congress expressed a TVA, the Asian Development Bank, nance housing in the next decade and clear intention to redefine the term the Washington Metropolitan Area up to $4 trillion by the end of the cen "bank.'' Transportation Authority, and various tury, and that one-half to three This liberal grandfathering is possi housing, health care, university, and fourths of those mortgages will be fi ble because there have been no exam dormitory projects. nanced through securities backed by ples of the misuse of "nonbank This was not because those issues pools of mortgages. Presently, three banks." Liberal grandfathering also is were safer, but because Congress was federally chartered entitles-FNMA, possible only because the modest ex especially aware of the need to hold GNMA, and FHLMC-issue 95 percent panison of permissible activities for down underwriters' fees on those of the mortgage-backed securities in depository institutions in S. 2851 projects. The same analysis applies to the secondary market. That ratio, moves in the direction of lessening all municipal revenue bonds, and S. however, very likely will be changed their competitive disadvantages vis-a 2851 merely fixes the historical anom by the end of this decade as the re vis the diversified providers of finan aly which has prevented banks from cently developed. privately-issued cial services. September 11, 1984 CONGRESSIONAL RECORD-SENATE 24747 CONCLUSION the business of banking and other keeping banks in banking is to keep Mr. President, I repeat that our fi lines of commercial and financial en other businesses out of banking. Sepa nancial system is going through a deavor. They were enacted in previous ration of function is a two-way street. transition, that measured changes in Congresses in order to promote safe It makes no sense to confine banks to our national policy on financial serv banking, prevent conflicts of interest a limited range of activities while per ices are needed, and that S. 2851 is the and unfair competition, and avoid an mitting unregulated entities to offer appropriate legislative response to the undue concentration of economic products and services unique to bank most pressing issues confronting our power. These objectives were valid ing. For that reason. Congress has also depository institutions. when they were first enacted into law made it illegal for nonbanking firms to The few, limited expansions of ac and they remain valid today. own banks or to offer products unique tivities authorized by the bill are a Mr. President, I think that very few to banking such as checking accounts. measured, but essential, step toward Senators and very few people reflect Many people wonder why we should competitive equity and better, more on the fact that we have a unique have this separation. But I think if efficient financial services for consum banking system in this country. you reflect on it a minute, consider for ers and businesses. Almost every other country in the instance a firm in the business of leas Mr. PROXMIRE. Mr. President, the world has a concentration of banking ing automobiles. For that firm the Financial Services Competitive Equity in very few institutions, whether it is most important single ingredient is Act, S. 2851, is a constructive attempt Canada or England or France or Italy access to credit. If it can get credit at by the committee to close some of the or Japan. These countries will have more gaping loopholes in our banking five, six, or seven banks that do about good terms, it can beat the competi laws while providing bank institutions 90 percent of the business. That is not tion. Suppose the bank comes along with limited new securities powers. true in this country. We have 15,000 and gets in the business through a The most damaging loophole closed is banks. While our big banks do a big holding company and buys a competi the so-called nonbank bank loophole share of business, the fact is that the tive auto leaser. How would you like to which has undermined the separation 10 biggest banks do not do the 90 per be in business against a competitor of banking from other businesses cent as they do in other countries or who had all the capital they want and while paving the way for unrestricted 95 percent; they do only 30 percent of had it, furthermore. on the basis interstate banking. The bill also plugs the business. where it was a competitor who gets the so-ealled South Dakota loophole We have a really diversified locally the capital at more favorable terms by restricting the ability of States to owned financial system. The great ad than you could? Obviously it would be authorize insurance powers for bank vantage of that, of course, is that a very unfair situation, and the bank holding companies beyond those avail people who live in a community know would be able to run out of business able in the Bank Holding Company the community, go to school with the any competitor who wanted to get into Act. Finally, the bill closes the loop people who are their customers, un the field. hole in the Glass-Steagall Act which derstand their character, understand This is true of almost any business allows State chartered banks not much more than you get in any kind which relies heavily on credit. And, of members of the Federal Reserve of a system where you rely simply on course, many of our businesses do, and System to engage in the securities the numbers, run our financial system, that is why we would have a much less business. and I think that is a big reason why fairer system, much less competitive Incidentally. so much of the protest the U.S. economy over the years has system if we permitted banks to get against this bill centered on the securi been so productive and so efficient and into real estate and get into some of ties people. That particular provision, has been ahead of the economies in these other areas that they are so anx it seems to me, should be more impor other countries. ious to get into. tant to them than the new powers That is one of the elements that has In addition to limiting the activities that we have which they are so vigor been overlooked but I think that this of banks, Congress has also limited the ously protesting. bill tries very, very hard to preserve. ability of banks to branch across State Most banking bills are the product There has been a tendency for the lines. The Bank Holding Company Act of compromise, and S. 2851 is no ex very big banks to move into other prohibits the ownership of banks out ception. The committee had to balance areas to get much bigger, swallow up side the State where the holding com the drive for further banking deregu other banks, and this is an attempt on pany is based unless specifically per lation against the need to maintain a the part of the committee to provide mitted under the law of the targeted safe and sound banking system. The the kind of diversification, the kind of State. As a result of these prohibi benefits of more deregulation had to widespread ownership, and to prevent tions, the banking system of the be weighed against the potential costs the kind of concentration and conflict United States is more decentralized of undue concentration or conflicts of of interest which threatens and could than any major country, and I already interest. Difficult choices had to be threaten our banking system. indicated the statistics on that. In made on what services were to be al In establishing our financial frame most advanced industrial countries, lowed bank holding companies and in work, Congress has traditionally the top 10 banks have upward of 90 some cases decisions were reached looked upon banks as unique institu percent of banking deposits; in the only by a close vote. tions broadly affected with a public United States, the top 10 banks have By and large, the bill reported by purpose. This is because banks are the less than 30 percent of bank deposits. the committee is a conservative ap dominant supplier of short-term busi A decentralized banking system pro proach to financial restructuring. The ness credit, the major source of motes not only greater competition committee rejected the sweeping de backup liquidity for our economy, the but also more local control over local regulation proposals of the Reagan ad custodians of the Nation's payment credit decisions. With over 14,000 ministration which would have al system, and the principal transmission banks in our country, most borrowers lowed bank holding companies to belt for our Nation's monetary policy. can have access to a locally owned and engage in a wide variety of real estate, Because of the unique and crucial controlled bank to meet their credit insurance, and other financial services. role played by banks in our economy, needs. If we were to convert to a Instead, the committee essentially Congress has sought to limit their ac highly concentrated European bank reaffirmed the major objectives of our tivities so that they can carry on their ing structure, most of the credit deci current banking laws as embodied in important functions with objectivity sions affecting our local economies the Bank Holding Company Act and and impartiality and thus ensure safe would be made in New York, Chicago, the Glass-Steagall Act. These laws and sound banking practices. Of and a few other financial money cen seek to enforce a separation between course, the corollary of a policy of ters. 24748 CONGRESSIONAL RECORD-SENATE September 11, 1981, The congressional policy of main framework regulating banking estab rities did not extend to underwriting taining a separate and decentralized lished by Congress in favor of their municipal bonds. As a result, banks banking system has come under attack own views on how the financial serv have continued to underwrite general from three fronts. First, attorneys ices industry should be structured. For obligation bonds of State and local have shown remarkable ingenuity in example, the FDIC recently declared governments during the last 50 years discovering and expanding upon loop that the 50-year-old Glass-Steagall Act with no documented instances of holes in our present banking laws in prohibition separating banking from abuse. order to circumvent existing legal re the securities business should no Unfortunately, in providing an ex strictions. The "nonbank bank" is a longer apply to State-chartered banks ception for general obligation bonds, classic example. Under the Bank Hold that are not members of the Federal ing Company Act, an institution is not Reserve System. The Comptroller of the Congress failed to distinguish be a bank unless it both makes commer the Currency aided and abetted the tween these bonds and municipal reve cial loans and accepts demand depos development of the nonbank bank nue bonds which, in 1933, were a its. If it forgoes one of these two serv loophole through "creative" interpre seldom used means of municipal fi ices, it is not a bank for Bank Holding tations of Federal law. The Federal nance. A general obligation bond is Company Act purposes even though it Reserve, whose members are generally backed by the full faith and credit of may have been chartered as a bank not bankers, has been the only agency the State whereas a revenue bond is under State or Federal law. that seems to give any deference to backed by the revenues from a specific If a bank wants to avoid tbe restric the laws passed by the Congress. project such as bridge tolls. Today, tions of the Bank Holding Company The third challenge to congressional revenue bonds account for more than Act, it can simply convert all of its banking policy has come from some half the volume of municipal financ demand deposits to NOW accounts States which have come to look upon ing although banks by law are preclud and turn itself into a "nonbank bank." their banking laws as instruments of ed from competing. Studies over the It can then be owned by any company economic development to be rede years have indicated that the cost of no matter how far removed its busi signed simply to lure a few hundred issuing municipal revenue bonds could ness may be from banking. Similarly, clerical jobs into a State. For example, be reduced if banks were allowed to existing bank holding companies can in early 1983, South Dakota amended compete directly with investment evade restrictions on interstate bank its banking laws to permit its State banking firms as they do in the gener ing by purchasing or establishing non chartered banks to engage in virtually al obligation bond market. bank banks across State lines irrespec any kind of insurance activity. In Because investment banking firms tive of State law. Or a bank that wants doing so it carefully provided that have a monopoly on revenue bond un to get into exotic new activities not these insurance activities could not be derwriting, there is considerable eco permitted to banks or bank holding performed inside the State if they nomic concentration in this market companies can turn itself into a non would adversely affect insurance com which translates into less competition bank, form a holding company, and panies or agents operating within the and higher borrowing costs for State engage in the forbidden activities State. But no such restrictions are ap and local governments. The 10 leading through a separate subsidiary of the plied to operations outside the State. underwriters of revenue bonds-all of holding company. Shortly after the South Dakota law which are investment banking firms In short, the nonbank bank loophole was passed, Citicorp, the Nation's larg accounted for 49 percent of the makes a shambles of the Bank Hold est bank holding company, applied to market in 1982. By way of contrast, ing Company Act. There are now hun buy a South Dakota bank with the the 10 leading underwriters of general dreds of applications for nonbank intent of using that bank to engage in obligation bonds-where commercial banks awaiting approval by the Feder a nationwide insurance business. banks can compete-accounted for al bank regulators. Most of these are While South Dakota may gain a few only 29 percent of the market. More from giant, money center banks seek hundred banking jobs, the congres over, the revenue bond market is be ing to establish nonbank banks in sional policy of keeping banking and coming more concentrated over time other States. The Comptroller of the insurance separate was undermined. whereas just the opposite is true of Currency, an ardent proponent of In effect, South Dakota determined the general obligation bond market. interstate banking, has vowed he will banking policy for the other 49 States Since bank underwriting of revenue approve most of these applications while insulating itself from the conse bonds will lower State and local bor unless Congress acts to prevent it. quences of its own actions. rowing costs, State and local organiza Thus, if Congress does not close the While S. 2851 reaffirms current nonbank bank loophole, our decentral banking policy as established by Con tions strongly support the committee's ized banking system can be radically gress, it nonetheless does provide bank action. These include the Government transformed almost overnight. holding companies with limited new Finance Officers Association, the Na A second challenge to congressional securities powers. In particular, it tional League of Cities, the National banking policy has come from the Fed would allow bank holding companies Governors Association, the National eral bank regulators themselves. One to underwrite and deal in municipal Conference of State Legislatures, the of the shortcomings of our bank regu revenue bonds and mortgage backed National Association of Counties, and latory system stems from the fact that securities. There is no credible evi the U.S. Conference of Mayors. the regulators are often drawn from dence that the basic objectives of the The other new power authorized for and return to the banking community. Bank Holding Company Act or the bank holding companies is to under As a result, regulators tend to view re Glass-Steagall Act would be threat write and deal in mortgage backed se strictions on banks more from the per ened if bank holding companies were curities. A mortgage backed security is spective of bankers-that is, as obsta authorized to exercise these two limit a bond-type instrument secured by a cles to "progress" where progress is de ed powers. pool of conventional mortgage loans. fined as an ever expanding empire for With respect to underwriting munic These new instruments have been de the banking business. Efforts to re ipal revenue bonds, it should be noted veloped in the private sector as a way strict banks are not seen as legitimate that when Congress passed the origi of enhancing the flow of funds into objectives of public policy but rather nal Glass-Steagall Act in 1933, it spe residential mortgage investments. as the efforts of selfish industries to cifically allowed banks to continue un While banks can issue mortgage protect themselves from bank compe derwriting general obligation bonds of backed securities as originating mort tition. State and local govenunents. The Con gage lenders, they are precluded by Given this mindset, bank regulators gress determined that the abuses in law from selling them to the ultimate have often ignored the statutory volved in underwriting corporate secu- investor. September 11, 1981,. CONGRESSIONAL RECORD-SENATE 24749 As in the case of revenue bonds, the the Senate a long time-27 years. I to qualified thrift leaders to golden market for mortgage backed securities have been on the Banking Committee parachutes. But its core provisions, in will be strengthened if banks are al every 1 of those 27 years. I have served my view, are the ones aimed at restor lowed to compete with investment as chairman of that committee for 6 ing the integrity of our financial banking firms. The ultimate benefici years and as ranking member for 4 policy framework. ary will be the American home buyer years. I do not think I have ever seen a Banks and other depository institu whose borrowing costs will be reduced. more diligent or nearly as diligent a tions play a unique and critical role in For these reasons, this provision of chairman as we have now. He has our economic system. They provide a the bill is supported by the National worked extraordinarily hard, has reliable payments system. They fur Association of Homebuilders and the broken all records as far as the com nish a secure repository for liquid sav National Association of Realtors. mittee is concerned in the time that ings. They aggregate funds and serve Mr. President, notwithstanding the he has devoted to this bill-endless substantial benefits of S. 2851, in my days of hearings over a period of 15 as impartial allocators of credit. And view it must still be regarded as a months, 4,500 pages of testimony, 72 they operate as the transmission belt flawed product. It encourages the witnesses. As we all know, we have a for monetary policy, linking actions by merging of bank and thrift industries complicated as well as a diversified fi the central bank to the real economic that may not be in the best interests nancial system, and the chairman of factors they are intended to influence. of a strong home-financing system. I the committee, I think, has done a su For this reason, changes affecting think that is unfortunate because the perlative job under tough circum the function of these institutions and thrift industries have their function stances. their relationships to the broader fi and if we are going to be able to fi Although, as I have indicated, I do nancial and economic system raise nance homebuilding and individual disagree with him on many of the im fundamental public policy issues. They home purchases we found that in the portant issues, nevertheless he has put are not merely matters of private in past it is necessary to have strong in together a bill which I will enthusi terest to the financial service industry dependent home financing industries astically support and which I think per se. and the thrift industry has had that merits the support of the Senate. Established policy in this area has, function. And this bill unfortunately, I think we should be very sensitive for more than half a century, drawn as I say, encourages a merging of the to the fact that our economic system certain distinctions among different banking and thrift industries and in and our banking system could get into types of financial institutions and be that sense may threaten the ability of difficulty. The fact is that we have tween the financial sector and the homebuilders and home buyers gener had failures over the past few years larger economy. If these boundaries ally to get the kind of financing they and the failures of this past year, as I are to be altered, the change should need in the future. indicated yesterday, are greater than come as a result of a conscious policy Also it promotes regional interstate they have been at any time in the last decision by the Congress. We should banking in a way that sacrifices local 50 years. We have to be very careful not stand by and allow existing policy control over banking without maximiz about ensuring the safety and sound to be rewritten willy-nilly by clever ing competition. ness of our banks. This legislation will lawyers, novel technologies, and com I think that is an important matter help greatly in moving, in my judg plaisant regulators. If the structure of that I hope we can amend and change ment, in this direction and away from our financial system needs to be re because, as I say, the unique distinc a very dangerous tendency for our aligned, then it is up to the Congress, tive element of American banking is banks to get into difficulty. which is collectively supposed to rep its local control, and I come at this re Mr. President, I yield the floor. resent the public, to decide what new gional problem from the opposite way Mr. GARN. Mr. President, first let arrangements will better serve our that the distinguished Senator from me thank my distinguished colleague needs as a nation. The near collapse of New York has. Whereas he favors, as I from Wisconsin for his overly gener Continental Illinois and the trouble understand it, nationwide branching, I ous remarks. I will read them to my surrounding the Financial Corpora feel that we should confine branching children tonight and make them feel tion of America suggest a cautious ap to, as we have in the past, by and very proud. They are not deserved, but proach in this regard. large, to individual States so that we I appreciate them anyway. This bill, Mr. President, may not be encourage individual local ownership. I would add that I had 6 years to Finally, Mr. President, the most seri watch the former chairman at work, perfect. Products of the give-and-take ous weakness in the bill and one that I so I tried to listen and observe during of the legislative mill seldom are. And do hope that the Senate will reform is those years and learn from his exam it is admittedly controversial in some it hands large banks a $4 billion bo ple. respects. But it is, in my judgment, a nanza, $4 billion over 6 years at the e Mr. LAUTENBERG. Mr. President, necessary step in the right direction. expense of the U.S. Treasury. I rise in support of the pending bill. Its central provisions begin the task of I think that is a serious, serious mis The Financial Services Competitive reestablishing a stable and consistent take, particularly at a time when we Equity Act, S. 2851, is the product of 2 statutory framework for the regula have a very unfortunate problem. I years of hard work, extensive hear tion of the core institutions of our fi think the most damaging problem ings, and vigorous debate in the nancial system. with respect to our economy is the size Senate Banking, Housing, and Urban It significantly narrows, if it does of the deficit and the size of the na Affairs Committee. not absolutely close, the nonbank tional debt and the growing size of the On balance, I believe the result is a bank loophole which has been exploit debt and this, of course, would in reasonably balanced measure that will ed to evade the restriction on both ac crease the debt at a rate of $4 billion promote greater rationality and con tivities and branching in the Bank over 6 years and at an increasing rate sistency in the regulation of the finan Holding Company Act. as time goes on. cial sector. In a larger sense, of course, It closes the "South Dakota.. loop So I am hopeful some of these flaws it is the latest installment in the con hole through which bank holding com can be corrected as the Senate pro tinuing effort to adjust financial panies have sought to exploit State ceeds to debate the legislation. policy to a rapidly changing environ regulatory laxity to acquire powers Mr. President, in closing, I would ment. denied them under Federal law. like to commend our chairman's lead S. 2851, Mr. President, is a compli It closes the "nonmember bank.. ership. I did that the other day, but I cated piece of legislation. It deals with loophole which would have permitted think it is well worth while emphasiz a broad range of complex and even State banks not belonging to the Fed ing once again. As I say, I have been in arcane subjects, from nonbank banks eral Reserve to engage in investment 24750 CONGRESSIONAL RECORD-SENATE September 11, 1984 banking contrary to long established banks in other States on a nationwide BENEFITS OF REGIONALLY RECIPROCAL BANKING policy principles. basis. Two other States allow their STATUTES It imposes a residential lending test banks to be purchased without restric Those States enacting and consider on unitary thrift holding companies, tion. ing regional banking laws are acting which helps to assure that thrifts Such actions represent the healthy on the conviction that the regionally owned by nonfinancial parents contin diversity found in our dual banking reciprocal banking statute option ue to maintain their commitment to system. Unfortunately, the basic right serves important economic develop housing finance. of each State to determine the nature ment and policy concerns. These It expands the securities activities of the banking system within its bor States anticipate benefits to consum permissible to bank holding companies ders is being challenged by a few large ers, to businesses, and to bank share to include municipal revenue bonds, holders. These benefits are to be mortgage backed securities, commer banks in a single State which would achieved within the context of the Na cial paper, and discount brokerage. impose their will on the entire bank tion's historic policy supporting State The latter two have already been ap ing system. Already, these banking control of banking resources. Regional proved by regulation. It authorizes re giants, with their vast resources, have banking is expected to act as an engine gional interstate banking agreements waged a titantic struggle. for regional economic development, for an experimental 5-year period. They have sought to have the Feder with stronger regional financial insti Taken together, these reforms go a al Reserve Board deny mergers based tutions providing an inducement for long way toward addressing the imbal on the regionally reciprocal State growth and relocation, for jobs and de ances, inequities, and uncertainties banking statutes which these banks velopment. that have developed in the financial oppose. The Federal Reserve Board This is an experiment. The results sector over the past several years. has found the laws on which such are not yet in, nor will they be for To be sure, S. 2851is no panacea for mergers are based are indeed compati some time. The various State laws en all the strains and problems in our fi ble with the Douglas amendment; four acted so far are different in many nancial system. But it is sound legisla such mergers have been approved in ways-in the method of entry permit tion that is responsive to some of the New England. A few banking giants ted, in the timeframe under which the more serious problems we face in fi have sought to have Federal district law is effective, and even in the State's nancial policy and I hope my col and circuit courts find that regionally definition of a "region." One would leagues will support it. reciprocal State banking statutes are not expect less in an experiment. In conclusion, Mr. President. I would be remiss if I did not acknowledge the unconstitutional; however, these stat STATE CONTROL OF BANKING RESOURCES hard work and effective leadership of utes have been upheld at every level. The United States has a history of both the distinguished chairman, Sen But still the bank giants continue two centuries of populist concern ator GARN, and the able ranking their struggle. They are now appealing about large financial institutions. Over member, Senator PRoXMIRE. Both their case to the Supreme Court, an the years, people have worried about have exhibited that rare blend of per action sorely testing the limited re how interstate banking might affect severance, tact, and flexibility which is sources of the regional banks against the concentration of political and eco indispensable to legislative success. whom the action is being brought. nomic power, the distribution of They are to be commended for Why then should Congress become in credit, the capital adequacy, safety, moving a bill which is so complicated volved in this process? and soundness of our financial struc and touches on so many contentious Congress has become involved in ture, and the role of the dual banking issues. The Senate owes them a debt order to clarify the intent of the legis system. of gratitude.e lation it passed nearly 30 years ago The bedrock of our diverse regional TITLE X OF S. 285 and to prevent further disruption to structure, our banking system that Mr. MATI'INGLY. Mr. President, I the banking system being caused by conforms to that structure, and our wish to commend my colleagues and this unnecessary litigation. Four bank desire to minimize centralized control chairman of the Committee on Bank mergers are pending in New England, over the Nation's financial resources is ing, Housing, and Urban Mfalrs, the having been stayed pending the out American policy maintaining State Honorable JAKE GARN, for including come of the ongoing litigation. An control of banking structure. The prin title X in S. 2851. Title X was intro ciples embodied in current Federal other merger has been announced be banking law recognize that the indi duced in the Senate by me originally tween a Florida and a Georgia bank as S. 2113, and was incorporated into vidual States can best decide such con holding company. These and other structive issues. States continually Chairman GARN's deregulation pack strategic plans have been put on hold age which is now being considered by have liberalized limitations on geo indefinitely causing needless uncer graphic expansion by commercial this body. tainty in the quickly changing finan- I introduced S. 2213 in order to clari banks and bank holding companies, cial services industry. • even across State lines, and they will fy the intent of Congress when it en By acting now to approve a banking acted section 3(d) of the Bank Holding continue to do so. But each one acts Company Act of 1956. Popularly bill containing title X, this body would when it is in the best interest of its known as the Douglas amendment, be alleviating the uncertainty in citizens to do so. To imply that one ap this provision of Federal banking law future planning now present in the 40 proach is optimal for all 50 States is to provides that bank holding companies States which have or are considering ignore the existence of our decentral headquartered in one State may not regionally reciprocal banking legisla ized economic and political heritage. cross the borders of another State tion. Without action now, in this ses Regional banking maintains the fun unless specifically authorized to do so sion, we will be allowing a few banks damental public policy of State con by that State. with the most resources to dictate the trol of banking structure. Enactment To date, nine States (including my nature of the banking system in 49 of a congressional sanction for the home State of Georgia) have acted to other States. This should not be al option to enact regionally reciprocal allow banks from other States in legis lowed to happen. banking statutes reaffirms the Con latively-defined regions to cross State The clarification of Federal banking gress support for this policy. borders for banking purposes, provid law brought by the enactment of title CONSUMER BENEFI TS ed the States granted such a privilege X would be to the benefit of the Research evidence has indicated provide reciprocal treatment to banks economies and residents of each of the that the qualit y and quantities of serv from the granting State. Another regions in which regionally banking ices provided by banks are enhanced State provides reciprocal treatment to statutes are enacted. whenever banking expansion is per- September 11, 1984 CONGRESSIONAL RECORD-SENATE 24751 mitted. The availabutty of credit to lo CONCENTRATION Thus. current law and basic banking cally limited consumers is also in Whereas competition is generally practicalities help to ensure that, even creased due to the entry of banks with evaluated on the local level, concentra under regional banking, the U.S. bank more funds available for lending. tion is generally looked at from both a ing system will remain the least con With greater resources available to local and national perspective. On the centrated of any major nation. them, banks can capitalize on their national level, numerous factors are at There are over 14.000 banks in this size by achieving economics of scale in work ensuring that regionally recipro country; some 90 percent of these are the money markets, thereby reducing cal State banking statutes do not lead community banks with assets of less the banks' cost of funds. As deregula to undesired amounts of concentration than $100 million. California provides tion of interest rates paid to consum in the banking industry. Three of a good example of very large banks ers continues, this will become increas these factors are: sharing a market with many small ingly important in order to provide First. bank holding companies banks and thrifts. This coexistence of consumers with the highest return expand with a particular local market many small banks with larger regional possible on their savings. Greater size in mind. However, there are only a and money center banks confirms the also permits regional banks to more limited number of potentially attrac ability of these small firms to exist in easily and efficiently add new products tive banking markets-markets in highly competitive markets. from which consumers will benefit. which the expanding bank can operate According to a Federal Reserve Thus, regional banking will bring ben profitably. If all of those banks consid Board study published in the Federal efits to consumers in the form of ering expansion aim at the same at Reserve Bulletin in February 1982, more, better, and competitively priced tractive markets. many banks wlll be concentration of banking resources de banking products and services. Addi priced out of the market. Making a clined between 1969 and 1980. At the tionally, regional banking gives con profit when paying a substantial pre national level, for example, the pro sumer,s peace of mind, knowing that mium for a bank would be difficult. In portion of domestic deposits held by their deposits are remaining in the the same way. a rash of de novo entry the 10 largest banking organizations region, to help foster the region's de would increase competition and reduce fell from 20.2 percent in December velopment. profitability. 1969 to 17.9 percent in December 1980. Second, bank holding companies are The same trend of decreasing concen BENEFITS TO BUSINESS constrained as well by their own inter tration was found using Standard Met The regional banking option will nal limitations. De novo banks require ropolitan Statistical Areas to approxi provide economic benefits to business significant new capital. and acquisi mate local banking markets. firms. particularly small businesses. tions based on stock exchanges are Other financial industries are con Basic economic similarities among based on the capital markets valuation siderably more concentrated than groups of States could provide eco of the stock involved. When coupled commercial banking. For example, in nomic efficiencies from limited inter with a limited supply of the manage the securities brokerage industry, 16 state banking. The bank serving man ment talent needed when forming a percent of the firms account for 92 ufacturers in Georgia. for instance, new bank or acquiring an existing percent of total industry assets. By can bring experience and expertise to talent needed when forming a new contrast. it would take 35 percent of similar customers in the Carolinas bank or acquiring an existing one, it the Nation's banking organizations to that a Minneapolis bank cannot. Lend becomes obvious that banks simply account for 92 percent of domestic ing to wheat growers in Kansas is simi cannot expand without limit. banking assets. The top 10 life insur lar to lending to wheat growers in A third consideration is the regula ance companies account for 51.5 per South Dakota; oil drilling in Wyoming tory delay involved in banking expan cent of the total assets of the industry, is similar to drilling in Colorado. sion. At least one regulatory approval vis-a-vis 21.7 percent for the 10 largest In particular, smaller firms may ben is needed when forming a subsidiary banking organizations. Continued efit from increased competition that or acquiring a bank. The enactment of State control over banking expansion can result from regional interstate regional banking statutes in New Eng will help to ensure that banking con banking. The small furniture manu land and the Southeast has demon tinues to be a relatively unconcentrat facturer in Virginia may not be a cus strated how banks respond to these ed industry. And to the extent that re tomer sought by a money center bank laws, and has highlighted the regula gional banking creates strong and moving into that State, but may be de tory delays possible. An increased flow more stable banks, State regional sirable to the North Carolina bank al of applications to regulators, especial banking statutes will promote safety ready familiar with the business. ly those involving new policy ques and soundness in the American bank COIIP.E'l'ITION tions, slows the pace of regulatory de ing system. Regional banking statutes improve cisionmaking and of banking consoli SMALL BANKS the level of competition among banks dation. Notwithstanding the fears of smaller in those States where they are enacted On the local level, the concentration banking organizations, regional bank by automatically increasing the issue centers on the acquisition of one holding company expansion appears to number potential entrants to banking bank in a local market by another in pose no threat to the viabutty of small markets in the State. For local bank the same market. All holding company banks. The continued presence of ing markets, this means the improve acquisitions. though approved by the small banks in competitive major mar ment of the level of competition in State and the Federal Reserve Board. kets is a tribute to these banks' these markets when a local organiza remain subject to the administration strength. tion is merged with or acquired by an of the Sherman and Clayton Acts by Evidence suggests that small firms out-of-State organization. the Department of Justice. Ample and prefer to deal with smaller banks, and For example, management and the dependable machinery for judging the small banks have long operated profit range of services of the merged/ac competitive impact of any and all pro ably in this competitive environment. quired bank can be significantly en posed interstate banking consolida Thus, de novo interstate banking or hanced by the . new parent organiza tions is already in place. Clear stand bank holding company expansion is tion, enabling the bank to compete ards have been consistently applied by unlikely to represent a significant more vigorously with local banks. In the banking agencies, and have been change in the competitive structure of those States where de novo entry is understood by banks and their coun small banks. And if a large local com permitted, the entry of a new bank sel. so that mergers that would be pro petitor is acquired by an out-of-State into the market directly increases hibited by these guidelines are rarely institution, the small local bank's com competition. ever proposed. petitive position is probably improved. 24752 CONGRESSIONAL RECORD-SENATE September 11, 1984 The bank in a smaller city or town commercial and industrial growth and SUPPORT FOR REGIONAL BANKING A1'fD TITLE X may be affected significantly by entry relocation, thereby promoting regional Large numbers of banks support re of a large out-of-State bank, but such development. Other realities are at gionally reciprocal State banking stat banks are unlikely to enter de novo work in addition to economic ones. Re utes as a viable alternative to main into smaller cities. There are limits to gions share common sociocultural in taining the status quo or leaping to the pace at which even the most ag terests, and regional residents will sup nationwide interstate banking. Some gressive bank can expand following a port regional banking growth that of these banks have already acted change in the law. The small-city bank leads to greater regional benefits. where regional banking is permitted; is most likely to find itself in direct CONSTITUTIONALITY others are waiting for their State to competition with an out-of-State insti act. tution if that institution acquires an The Federal Reserve Board, after finding that regionally reciprocal The Senate Banking Committee has existing bank competitor or its parent. voted overwhelmingly to support title But experience has shown that the State banking statutes are not clearly local bank's ability to compete with inconsistent with the U.S. Constitu X and the notion of continuing the the larger bank for small business cus tion, has approved four mergers/ac policy of permitting States to decide tomers is at least as good as its ability quisitions based on such State stat their own banking future. Our 12-to-5 to handle existing competition. utes. However, opponents of these vote underscores the wide popularity In addition, many small independent State laws continue to contest the of title X and of maintaining the cen banks would have the option under statutes' constitutionality in cases turies-old policy of decentralized bank State regional banking statutes to before Federal courts. It has been control. form regional networks of independ noted by many observers that a strong Federal and State bank regulators ent banks. In such a framework, these case has been made for the constitu have recognized the need for action banks could pool resources, such as tionality of these statutes. such as that found in title X. For ex loan participations and technology, to The Douglas amendment, section ample, I would note the following achieve greater efficiency. Often indi 3(d) of the Bank Holding Company statements: vidual States do not provide large Act, prohibits out-of-State bank acqui Comptroller of the Currency: "While we enough settings for sufficient econo sitions unless such acquisitions are would prefer more extensive geographic de mies of scale-but regions do. "specifically" authorized by the stat regulation, we welcome any-even partial relaxation of the current restrictions. For QUALITY OF SERVICE ute laws of the State in which such instance authorizing reciprocal or regional The level and quality of banking bank is located, by language to that expansion may be a reasonable first step in services provided by expanding banks effect and not merely by "implica the direction of nationwide interstate bank in a regional banking environment are tion." Congress has exercised its power ing." . bankers will direct their resources for the laws when and if they choose to do CSBS questions the need for the Sunset regional growth. so, no compact requiring congressional provision contained in S. 2181. We are con PROTECTIONISM approval is created. cerned that the sunset provision might be It has been argued by some that Regional banking statutes are eco intended or understood to cast current state State regional banking statutes are an nomic regulations rationally related to law as an 'experiment' rather than as the act of economic protectionism, leading a legitimate State purpose-that is, body of pertinent law, and that, insofar as to the balkanization of States into the preservation of a banking industry the provisions of this section are a clarifica As tion of the degree of delegation under Doug banking regions. This turns one of the that is responsive to local needs. las, if they are allowed to sunset it would primary arguments for regional bank such, these statutes do not violate the signal open season for lawsuits on the mean ing on its head, since regional banking Constitution's equal protection clause. ing of Douglas." on the grounds . . . that the Con necticut Interstate Banking Act is unconsti viable because they are sensitive to these statutes are designed to accom tutional. . . . The Board believes the policy the unique needs, attitudes, business plish. Because of this, and because no issues that are raised by the regional ap practices, and commitments of busi extraterritorial application of State proach are inherently national and would ness and commerce within the region. law is involved, the due process clause best be resolved by Congressional action." By expanding with a region, these in of the Constitution is not violated. Fi Boston, ing statutes received from both Houses icant authority to the States in bank Massachusetts of Congress is indicative of the wide ing affairs. Now is not the time to Order Approving Merger of Bank Holding spread national support that exists for begin Federal intrusion into a matter Companies and Acquisition of Companies regional banking. which should be left to the States. Engaged in Commercial Finance, Leasing, INAPPROPRIATE ALTERNATIVES TO TITLE X Third, by adding a "trigger" to title Real Estate Lending, Factoring and Gen First, currently, title X contains a 5- X calling for the elimination of the eral Trust Company Activities year "sunset" provision. Five years McFadden Act and the Douglas Bank of New England Corporation, subsequent to the title's enactment, amendment, the Congress would be re Boston Massachusetts ("BNE"), a bank the congressional sanction for regional versing a two-centuries-old national holding company within the meaning of the banking would expire. Bank Holding Company Act of 1956, as policy of State determination of bank amended <12 U.S.C. § 1841 et seq.) <"BHC Many assume that, at the end of 5 ing structure. There is no reasonable years, Congress will act to eliminate Act"), has applied for the Board's approval justification for such an action. under section 3(a)(5) of the Act <12 U.S.C. § the McFadden/Douglas protections 1842(a)(5)), to merge with CBT Corporation, for State banking systems. This is an Imposing a trigger on title X de stroys the notion of gradual, evolu Hartford, Connecticut <"CBT"), also a bank unfair assumption. Moreover, money holding company, and thereby to acquire in center banks favor an even shorter tionary change in State banking sys directly The Connecticut Bank and Trust sunset, anticipating an ever-quicker tems found in the regional banking Company, N.A., Hartford, Connecticut. In route to nationwide interstate bank concept. A trigger reduces State op addition, BNE has applied for the Board's ing. tions. It disregards the actions and approval under section 4(c)(8) of the Act <12 Reducing the sunset would ignore intent of State legislatures. And it as U.S.C. § 1843(c)(8)) and section 225.23(a)(2) of the Board's Regulation Y <12 U.S.C. § the State political, as well as the prac sures that title X would not be passed 225.23(a)(2)) to acquire CBT's nonbanking tical and regulatory, realities involved by this body. subsidiaries: CBT Trust Company of Flori in States enacting regional banking THE TIME TO ACT IS NOW da, N.A., West Palm Beach, Florida ("CBT statutes and banks planning and exe It is important that the Congress act Trust">; Lazere Financial Corporation, New cuting mergers under them. Many York, New York ("Lazere">; CBT Business States have not yet passed regional now to ensure that States continue to Credit Corporation, Hartford, Connecticut laws, but are actively considering have the right to determine their ("BCC">; CBT Factors Corporation, New them. Legislatures in these States may banking future through methods such York, New York ("Factors"); CBT Realty not meet until 1985, or even 1986. as regional banking. Not to act is to Corporation, Hartford, Connecticut Added to the time needed for State allow the continued chipping away at ("Realty"); and General Discount Corpora States' banking rights through the ac tion, Boston Massachusetts ("GDC"). These action is that needed for individual companies, with the exception of CBT banks to plan merger and acquisition tions of the money center banks. And Trust, are subsidiaries of CBT Financial strategy once State plans are known. it would send improper signals to the Corporation, Hartford Connecticut, a com On top of this, add the time for ap Federal courts, courts which could use pany organized as a holding company for proval by regulators and a possible congressional guidance on this most CBT's nonbanking subsidiaries. CBT Trust backup of applications when regional important matter. engages in general trust company activities banking laws are passed, and it is easy Mr. President, with your permission, in Florida. Lazere and BCC offer accounts to receivable, inventory and equipment financ see why a 5-year sunset should be I wish to have introduced into the ing. Factors engages in "advance" and "ma the minimum considered. A minimum RECORD today several documents of turity" factoring, and Realty in real estate 5-year sunset would also help to un relevance to the matter before us now. lending. GDC, with subsidiaries in Maine, derscore the experimental nature of The first is the Federal Reserve Massachusetts and Canada, engages in cap regional banking and provide adequate Board's announcement approving the ital equipment financing through lending time for the evaluation of that experi and leasing, and its Canadian subsidiary, ment. Otherwise, the experiment first of four New England regional CBT Leasing Limited, conducts such lending would have to be reviewed with incom bank mergers; the second is the deci and leasing activities outside the United plete results. sion of the U.S. Court of Appeals for States pursuant to section 4(c)(13) of the Second, a Federal determination of the Second Circuit affirming the Fed Act <12 U.S.C. § 1843<13)). All of these ac banking regions would destroy the in eral Reserve Board's decision; and fi tivities have been determined by the Board nally, a State-by-State review of State to be closely related to banking under sec herently State-directed nature of the tions 225.25(b) <1>. <3> and <5> of Regulation regional banking option. The whole statutes, legislation, and action con Y <12 C.F.R. § 225.25 0), (3) and (5)). purpose of State regionally reciprocal cerning bank expansion across State Notice of these applications, affording an banking statutes is to provide an ex lines. opportunity for interested persons to periment in regional banking that re There being no objection, the mate submit comments, has been given in accord tains for each State its historical op rial was ordered to be printed in the ance with sections 3 and 4 of the Act <48 Federal Register 41524). The time for filing tions as far as directing that State's RECORD, as follows: comments has expired and the Board has banking structure. Most importantly, [Federal Reserve Press Release] considered the applications and all com Federal determination of banking re MARCH 26, 1984. ments received in light of the factors set gions overturns the McFadden Act and The Federal Reserve Board today an forth in section 3(c) <12 U.S.C. § 1842(c)) the Douglas amendment, an action nounced its approval of the application of and the considerations specified in section that would not square with political Bank of New England Corporation, Boston, 4<8> of the Act ( 12 U.S.C. § 1843(c)(8)). In reality. Title X is overwhelmingly sup Massachusetts, to merge with CBT Corpora particular, the Board has considered the ported because it leaves to each State tion, Hartford, Connecticut. comments of Citicorp, New York, New York, and Northeast Bancorp, Inc., New Haven, the right to decide its banking future. Attached is the Board's Order relating to Connecticut, as well as the comments of sev By taking away options from the this action. eral community groups located in Hartford, States to associate with other States Attachment. Connecticut. for banking purposes, the experiment BNE, with twelve bank subsidiaries, has is soured. Each State should be able to consolidated assets of $5.9 billion and depos determine for itself which regional its of $3.7 billion, representing 13.3 percent alignment is best. Perhaps contiguous of the total deposits in commercial banks in States. Perhaps a region of its own Massachusetts. 1 BNE is the fourth largest design. Perhaps even Federal Reserve commercial banking organization in Massa- districts. So long as it is a State's choice, the particular configuration is Footnotes at end of article. 24754 CONGRESSIONAL RECORD-SENATE September 11, 1984 chusetts. CBT, which has total assets of $5.9 should the New England interstate banking determination that CIBA is inconsistent bllllon and total deposits of $3.4 bllllon, is zone be upheld, a system of regional zones with the Commerce Clause, Compact Clause the largest bank holding company in Con may develop involving major areas of the or Equal Protection Clause of the United necticut. CBT holds 24.8 percent of all de nation.• States Constitution.11 Accordingly, the posits in commercial banks in Connecticut. TBJ: CONSTITtJ'TIONALITY OP THE CONNECTICUT Board will not deny this application on the Upon consummation of the proposed STATUTE grounds urged by Protestants that CIBA is merger, BNE would become the second larg Protestants, ctticorp and Northeast unconstitutional. The analysis of this pro est bank holding company in New England Bancorp, Inc., have challenged the constitu posal under sections 3 and 4 of the Bank in terms of assets and the largest in terms tionality of the Connecticut Interstate Holding Company Act is based upon this of domestic deposits. Banking Act 11 and, in particular, the provi finding. Section 3 of the Act <12 U.S.C. 1842(d)), sions of CIBA that allows only New England the Douglas Amendment, prohibits the CONSmERATIONS UNDER SECTIONS 3 AND 4 OP bank holding companies ., to acquire banks THE BANK HOLDING COMPANY AC'l Board from approving any application by a or bank holding companies located in Con bank holding company to acquire any bank necticut. The Protestants assert that such In addition to determining that the located outside of the State in which the op dfscrlmtnatory legislation is unconstitution merger of BNE and CBT is expressly au erations of the bank holding company's al under the provisions of the Compact thorized by a valid statute as required by banking subsidiaries are principally con Clause, • the EQual Protection Clause 11 and section 3(d) of the BHC Act, the Board must ducted, unless such acquisition is "speclfl the Commerce Clause 10 of the United decide whether this acquisition is consistent cally authorized by the statute laws of the States Constitution. with the standards of sections 3 and 4 of the State in which such bank is located, by lan The requirement that the Board address Act. guage to that effect and not merely by im these issues derives from a series of judicial Section 3 Considerations. BNE's twelve plication." The statute laws of Connecticut decisions beginning with Whitney National banking subsidiaries operate in nine of the authorize the acquisition of a banking insti Bank in Jetterson Parish v. Bank of New Or fourteen MassachUsetts banking markets,u tution in Connecticut by a bank holding leans and Tru.8t Company, 379 U.S. 411 while CBT's single bank subsidiary operates company that controls a bank located in an <1965), which required that the Board make in each of the ten Connecticut banking mar other New England State, if that other New a finding in the first instance on the appli kets.17 Since BNE's banking subsidiaries do England State authorizes on a reciprocal cabillty and validity of state laws that pur not operate in Connecticut and CBT's bank basts the acqutsltion of a bank in that State port to authorize the particular transaction ing subsidiary does not operate in Massa by a Connecticut bank holding company.1 before the Board.11 The United States chusetts, the proposed transaction would Massachusetts has passed a reciprocal stat Court of Appeals for the District of Colum not ellminate any significant existing com ute that authorizes such an acquisition. 3 bia Circuit confirmed that this reQuirement petition in any relevant banking market. The Banking Commissioner of Connecti applied to constitutional issues when it The Board also has considered the effects cut and the Massachusetts Board of Bank stated in Iowa Independent Bankers Asso of this proposal on probable future competi Incorporation have approved this proposed ciation v. Board of Governors of the Federal tion in light of its proposed guidelines for merger pursuant to these reciprocal Inter Reserve System, 511 F.2d 1288, 1293 n.4 assessing the competitive effects of market state Banking Acts, thus finding that the <1975), that it felt constrained "to register extension mergers or acquisitions.u In eval transaction satisfies the requirements of the . . . substantial doubt that the Board can uating the effects of a proposal on probable respective statutes authorizing the inter continue to presume conclusively the consti future competition, the Board considers state acquisition of banks. Based upon its tutional validity of state or federal laws in market concentration, the number of proba review of the Connecticut Interstate Bank light of the Supreme Court's opinion in ble future entrants into the market, the size ing Act <"CIBA">, the Board concludes that [Whitney] ...." of the bank to be acquired, and the attrac Connecticut has by statute expressly au While in cases prior to Iowa Independent tiveness of the market for entry on a de thorized a Massachusetts bank holding com Bankers, supra, the Board declined to con novo or foothold basis absent approval of pany, such as BNE, to acquire a Connecticut sider constitutional issues, NCNB Corp. 59 the acquisition. bank or a Connecticut bank holding compa Fed. Res. Bull. 305, 307 <1973), 12 the reser With respect to the ten banking markets ny, such as CBT. Thus, the Connecticut Act vations about this course of action ex in Connecticut in which CBT operates, the meets the requirement of express authoriza pressed by the D.C. Circuit in that case has record shows that either the markets are tion for interstate bank acquisitions im led the Board to review the constitutional not highly concentrated or there are numer posed by sections 3 of the Bank Holding ity of state statutes, although the Board has ous other probable future entrants into the Company Act. decided that it will not "hold a state statute markets. Connecticut permits the acquisi The Connecticut and Massachusetts stat to be unconstitutional without clear and un tion of banks in Connecticut by bank hold utes are the first to be enacted that provide equivocal evidence of the inconsistency of ing companies located in other New England explicitly for limited interstate banking on a the state law with the federal Constitution." states, and there are a number of commer regional basts. Rhode Island has also en NCNB Corp. 68 Fed. Res. Bull. 54, 56 cial banking organizations, including five in acted regional interstate banking legislation <1982). 13 The Board believes this standard Massachusetts and three that limits entry into Rhode Island to bank to be consistent with the principle of statu in Rhode Island, with assets over $1 bllllon holding companies located in New England.• tory construction that legislatures are pre each that can be identified as probable The restriction in the Rhode Island statute, sumed to have acted within constitutional future entrants into the Connecticut bank however, is of limited duration. After two limits, 14 as well as with the historic role of ing markets. Moreover, the Board notes years the Rhode Island statute provides for the judicial branch of government in bal that market concentration ratios and CBT's national reciprocity, permitting entry of ancing state and federal interests in con rank and market share drop significantly in bank holding companies from any state that struing the scope of the constitutional each Connecticut market when deposits of will admit Rhode Island bank holding com powers of the states. This approach is also thrift institutions are considered. In view of panies. consistent with the Board's primary exper these considerations and other facts of The regional interstate banking system tise and delegated responsibility under the record, the Board concludes that elimina developing in New England raises issues of Act--to review bank holding company ex tion of BNE as a probable future entrant considerable importance because no fewer pansion proposals for compliance with the into markets served by CBT would not have than 15 state legislatures are considering public benefits test of section 4<8> of the a substantial anticompetitive effect in those proposals that, if enacted, would create re Act, including financial, competitive and markets. gional banking systems in every part of the community convenience and needs criteria. With respect to the nine Massachusetts 111 country. The Georgia legislature has al Thus, the Board will require evidence of a banking markets in which BNE operates, ready passed a regional interstate banking clear conflict with the United States Consti the record shows that there are a number of statute, and there are proposals for regional tution before the Board will find that CIBA commercial banking organizations, includ banking systems in the Southeast and three states as far north as Virginia), the North nies proposed in this case. in Rhode Island with assets over $1 billion west . Both the in the extensive record before the Board. After Cape Cod, are also not concentrated. More creasing number of states considering such review of the record, the Board concludes over, BNE is not a market leader in several proposals and the progress of the proposed that, while the issue is not free from doubt, markets, particularly when the deposits of legislation toward enactment suggest that, there is no clear and uneQuivocal basis for a thrift institutions are considered. On the September 11, 1984 CONGRESSIONAL RECORD-SENATE 24755 basis of these and other facts of record, the In the neighborhoods of the other two The approval of BNE's proposal to acquire Board concludes that the ellmination of Protestants, Behind the Rocks and South CBT's nonbank subsidiaries and to engage CBT as a probable future entrant would not west, CBT has a strong record of home im in equipment financing, leasing, real estate have a substantial anticompetitive effect in provement loans and it ranks among the lending, factoring, and accounts receivable the nine markets served by BNE. leading lending institutions in those areas in financing is subject to all the conditions set The financial and managerial resources of terms of the number of home improvement forth in Regulation Y, including section BNE, CBT, and their subsidiaries are consid loans. CBT has also documented a low 225.4 and section 225.23, and to the ered satisfactory and their prospects appear demand for first mortgages in these two Board's authority to require modification or favorable. This finding is based, in part, on areas. CBT has made a commitment to in termination of the activities of a holding the fact that BNE has committed to a pro crease its efforts to make residents of company or any of its subsidiaries as the gram to raise additional capital through a Protestants' communities aware of its loan Board finds necessary to assure compliance common stock offering and, in particular, to programs. Based on the foregoing and other with the provisions and purposes of the Act improve the capital position of its lead facts in the record, the Board concludes and Board's regulations and orders issued bank, Bank of New England, N.A., Boston, that CBT and BNE have satisfactory thereunder, or to prevent evasion thereof. Massachusetts. records of compliance with the CRA. The By order of the Board of Governors, 11 ef The Board has considered the conven considerations relating to the convenience fective March 26, 1984. ience and needs of the communities to be and needs of the communities to be served JAKES Mc.Al'EE, served. Although both BNE and CBT offer weigh in favor of approval. Associate Secretary of the Board.. a complete range of banking services, con Section 4fc)(8) Considerations. BNE has summation of this merger would provide also applied under section 4<8> of the FOOTNOTES more favorable access to the capital markets BHC Act to acquire the nonbanking subsidi 1 Banking data are as of June 30, 1983. and thereby permit BNE to provide expand aries of CBT, including Lazere, BCC, Fac a 1983 Conn. Acts 411 entitled "An ed access to consumer banking services in tors, GDC and Realty, which are all orga Act Concerning Interstate Ban.lting'' <"Connecticut Connecticut and Massachusetts, additional nized as subsidiaries of CBT Financial.21 Interstate Banking Act" or "CIBA">, I 2. credit capacity for growing commercial cus a Mass. Ann. Laws ch. 167A <"Massachusetts BNE has only one active nonbanking subsid Interstate Banking Act">, I 2. tomers and the presence of a substantial iary operating pursuant to section 4<8>.aa 4 R.I. Gen. Laws U 19-30-1, 19-30-2 cant impact on existing competition be cerning the constitutionality of CIBA. Pursuant to and the Board's Regulation BB <12 C.F.R. tween BNE's subsidiary banks and GDC. section 105 of the BHC Act, 12 U.S.C. I 1850, North· § 228). The CRA and Regulation BB require Given the size of CBT's equipment financ east clearly will become a competitor to BNE upon the Board to assess the record of the bank consummation of this acquisition. Moreover, the ing subsidiary and the limited scope of its Board believes that Citicorp, too, is a party in inter ing subsidiaries of any applicant in meeting activities in Massachusetts, the Board does est for purposes of this proceeding before the the credit needs of their local communities, not believe this transaction will result in Board since Citicorp competes in Connecticut and including low- and moderate-income neigh any significant decreased competition. Massachusetts with BNE and CBT, although on a borhoods, consistent with safe and sound There is no evidence in the record that somewhat limited basis, and, except for the restric operations. Although the Board does not or this transaction will result in any undue tions contained in the very statute it challenges, it dinarily consider the CRA record of the ac has the potential to become a more substantial concentration of resources, unfair competi competitor. quiree, the Board, for purposes of this case, tion, unsound banking practices, conflicts of has considered the CRA records not only of 1 New England bank holding companies include BNE's banking subsidiaries but also that of interest or other adverse effects. Based those with their principal place of business in Con upon these and other considerations reflect necticut, Maine, Massachusetts, New Hampshire, CBT because this merger involves two bank Rhode Island, and Vermont. The Connecticut stat holding companies of approximately equal ed in the record, the Board has determined that the balance of public interest factors ute further restricts the definition of "New Eng size. that it is required to consider under section land bank holding company" to exclude bank hold· Three Hartford, Connecticut, neighbor ing companies directly or indirectly controlled by hood citizens associations, Frog Hollow 4<8> of the Act is favorable. bank holding companies outside of New England. Residents Coalition, Concerned Citizens of Based on the foregoing and other facts of CIBA thus prohibits non-New England bank hold Southwest and Behind the Rocks Neighbor record, the Board has determined that the ing companies from "leapfrogging" into the Con hood Association, have protested this appli applications under sections 3 and 4 of the necticut market through Maine or other New Eng. cation on the basis of an alleged failure of Act should be and hereby are approved for land states that may enact interstate banking stat the reasons set forth above. utes without regional restrictions. CBT to meet the housing financing needs of • U.S. Const., Article I, section 10, clause 3. the low- and moderate-income neighbor In approving this application the Board • U.S. Const., Amendment XIV, Section 1. hoods of Hartford.20 In addition, the Frog does not intend to express any conclusion 1o U.S. Const., Article I, section 8, clause 3. Hollow Residents Coalition alleged that concerning the desirability, as a matter of 11 Justice Douglas in his dissent in Whitney noted CBT has failed to honor a commitment national policy, of the regional arrange that the specific issue with respect to the Louisiana made in July 1982 to provide a special fund ments provided for by CIBA. The Board rec statute at issue in that case would require the for mortgage, home improvement and hous ognizes that interstate banking is a highly Board to decide a "bare, bald question of ... con complex issue that unavoidably involves the stitutionality." 379 U.S. at 431. See also Fint State ing rehabilitation loans to owner-occupants Bank of Clute v. Board. of Govemon, 553 F.2d 950 of the Frog Hollow community. balancing of a number of different consider <5th Cir. 1977), and Gravou Bank v. Board. of Gov The community group Protestants have ations. However, if the New England region emon 478 F.2d 546 <8th Cir. 1973>, which do not failed to present any substantial evidence to al approach to interstate banking is emulat deal with constitutional issues but require a deci support their position. Nevertheless, the ed in other parts of the country, there is a sion by the Board as to the applicability of state Board has considered the issues raised by potential danger that the result could be to laws to bank holding company acquisitions. Protestants and the extensive response CBT divide the country into a number of banking 12 See also Banken Trtut New York Corp., 59 Fed. has provided with respect to its lending his regions. The Board believes that the public Res. Bull. 364 <1973) and North:wut Bancorpora policy issues that are raised by the regional tion, 38 Fed. Reg. 21,530 <1973). tory and practices in Protestants' neighbor u See also Florida Coa&t Bank&, Inc., 68 Fed. Res. hoods. The record demonstrates that, pur approach are inherently national and would BulL 781 (1982); Florida Coa3t Bank&, Inc. 69 Fed. suant to a July 1982 commitment, CBT has be best resolved by Congressional action. Res. Bull. 454 <1983). Moreover, the Board has indi established a special housing-related lending The acquisition of CBT's banking subsidi cated on one occasion that were it to tollow the in· program for the Frog Hollow community aries pursuant to section 3 of the Act shall terpretation of a state statute urged by a party to and has made a significant commitment of not be made before the thirtieth calendar an application it would be compelled to declare the funds at favorable rates and without ancil day following the effective date of this statute to be unconstitutional. KSAD, Inc., 70 Fed· Order or later than three months after the eral Reserve Bulletin 44 <1984). lary costs. CBT has also documented its 14 See Clement& v. Fa3hing, 102 S. Ct. 2836, 2843 commitment to meet the housing needs of effective date of this Order, unless such (1982); South Carolina State Highway Department low- and moderate-income neighborhoods period is extended for good cause by the v. BamtoeU Bro&., Inc., 303 U.S. 177, 195 <1938>; through housing ventures with other com Board or by the Federal Reserve Bank of Atchi&on, Topeka & Sante Fe Ry. Co. v. Matthe1Da, panies and neighborhood groups. Boston, pursuant to delegated authority. 174 u.s. 96 (1899). 24756 CONGRESSIONAL RECORD-SENATE September 11, 1984 15 The staff analysis of the constitutional issues CONSIDERATIONS UNDER THE COMPACT CLAUSE CONSIDERATIONS UNDER THE EQUAL raised by Protestants Is contained in an appendix to The Compact Clause of the United States PROTECTION CLAUSE this Order and Is made a part of the Board's find Constitution states that "[nlo State shall, ings in this case. Protestants also challenge the constitu without the Consent of Congress ... enter 1 • These Massachusetts banking markets include tionality of CIBA as a violation of the Equal Boston. Springfield. Cape Cod, Fall River, New into any Agreement or Compact with an Protection Clause of the Fourteenth Bedford. Amherst-Northhampton, Greenfield, other State, or with a foreign Power. . .."s Amendment, which provides "[n]o State North Adams-WUllamstown and Athol. BNE also The Supreme Court has indicated that an shall . . . deny to any person within its ju operates in the Massachusetts portion of the Provi interstate agreement is within the param risdiction the equal protection of the laws." dence, Rhode Island, banking market. eters of the Compact Clause and thus sub Protestants argue that CIBA's exclusion of 17 These Connecticut banking markets include ject to the requirement of congressional Hartford, New Haven, Bridgeport, Waterbury, New non-New England bank. holding companies London, Danbury, Torrington, Danielson, WUll consent only when: <1) an interstate com is an arbitrary restriction unrelated to any mantic and Old Saybrook. CBT also operates in the pact or agreement exists, (2) that tends to legitimate state purpose. Connecticut portion of the New York market. increase the power of the compacting states The Supreme Court in New Orleans v. 18 "Proposed Policy Statement of the Board of in such a manner as to interfere with feder Dukes, 427 U.S. 297, 303 <1976) (per curiam), Governors of the Federal Reserve System for As al supremacy. 1 articulated the following, frequently cited sessing Competitive Factors under the Bank CmA, when considered in light of its leg standard of judicial scrutiny under the Merger Act and the Bank Holding Act," 47 Federal islative history and the actions of other New 8 Register 9017 whether the challenged statute land banks would result in larger institutions that gional Interstate Banking, by testimony of might not be responsive to the credit needs of small legislators at hearings on the issue before has a legitimate purpose, and (2) whether it business enterprises. After a meeting with officials legislative committees in other New Eng was reasonable for the legislature to believe of CBT and BNE, the Small Business Association of land states, and by apparent review and the challenged classification would promote New England was satisfied and it withdrew its re comments on the proposed Connecticut leg that purpose. 1 o quest for a hearing. islation by the Massachusetts Banking De In answering these inquiries, the Supreme 2 1 CBT's nonbanking subsidiaries will represent Court has afforded great deference to a less than two percent of the consolidated assets of partment. The debate on the Connecticut bill refers to an "agreement" or "compact" state's statements of legislative purpose and the merged corporation. its statutory classifications to achieve those 22 BNE received approval after the filing of this on regional interstate banking. s application to acquire de novo a subsidiary to The Supreme Court in Virginia v. Tennes purposes. The Supreme Court has ordinari engage in leasing activities. That subsidiary, BNE see, 148 U.S. 503, 517-518 <1893), stated that ly been willing to uphold any classification Capital Corporation, Boston, Massachusetts, began the terms "agreement" and "compact" as based "upon a state of facts that reasonably operations on December 28, 1983. used in the Compact Clause are "sufficient can be conceived to constitute a distinction, 23 Voting for this action: Chairman Volcker and ly comprehensive to embrace all forms of or difference in state policy.... " Allied Governors Martin, Wallich, Partee, Teeters, Rice, Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, and Gramley. stipulation, written or verbal, and relating to all kinds of subjects." In United States 530 0959). The court will sustain economic Steel Corp. v. Multistate Tax Commission, legislation "if any set of facts reasonably APPENDIX TO THE ORDER APPROVING THE AP 434 U.S. 452, 470 <1978>. the Court specifi may be conceived to justify it." McGowan v. PLICATION OF BANK OF NEW ENGLAND CORP., cally addressed the issue of reciprocal stat Maryland, 366 U.S. 420, 426 <1961>. BOSTON, MA, To MERGE WITH CBT CORP., utes and stated that " agreements effected For the purpose of analysis under the HARTFORD, CT through reciprocal legislation may present Equal Protection Clause, CIBA appears to Citicorp, New York, NY, and Northeast opportunities for enhancement of state be rationally related to an attempt to main Bancorp, Inc., New Haven CT. have protest power at the expense of the federal suprem tain a banking system responsive to local ed the application of Bank of New England acy similar to the threats inherent in a needs in New England. The Hebb Report, a Corp., Boston, MA. to merge with CBT more formalized 'compact' ..." The Court report prepared by a Commission appointed Corp., Hartford, CT. Citicorp and Northeast emphasized that the federal impact rather by the Connecticut legislature to study argue that the application should be denied than the form of the agreement is the criti interstate banking, indicates that the pur because the Connecticut Interstate Banking cal inquiry under the Compact Clause. Ac poses of CIBA include avoiding undue con Act ("CIBA"> is unconstitutional and there cordingly, while in form CIBA can be con centration of resources, maintaining the re fore insufficient to authorize the proposed sidered to be part of an implicit compact or sponsiveness of the banking system to local merger. Protestants challenge the provi agreement that has never been approved or credit needs and providing an opportunity sions of CIBA that allow only New England authorized by Congress, as the cases cited for a limited interstate banking experi bank holding companies 1 to acquire banks above indicate, CIBA would violate the ment. 1 1 A finding of a rational basis for or bank holding companies located in Con Compact Clause only if it constitutes an en CIBA is consistent with the decision of the necticut. The Protestants assert that such hancement of state powers at the expense Court of Appeals for the District of Colum discriminatory legislation is unconstitution of federal supremacy. bia Circuit in Iowa Independent Bankers, al under the provisions of the Compact No such claim of infringement upon feder supra, upholding an Iowa statute against an Clause, 2 the Equal Protection Clause 3 and al supremacy could be maintained, however, Equal Protection Clause argument although the Commerce Clause 4 of the U.S. Constitu if CIBA has been authorized by Congress in that statute permitted only one out-of-state tion. the Douglas Amendment. The compatibility bank holding company to operate in Iowa. CIBA raises unique constitutional whether Congress in the Douglas Amend CIBA, governing admission of out-of-state issues. There are many decided cases defin ment granted the states plenary power to bank holding companies into a particular ing the permissible scope of state regula regulate entry of out-of-state bank holding state, such as Connecticut, involve essential tions favoring their own residents against companies, thereby renouncing a federal in ly economic legislation and do not raise those of all other states, but apparently no terest in such regulation for purposes of the issues of fundamental rights or draw upon judicial decisions testing the constitutional Compact Clause. The intent of Congress in suspect classifications. Since CIBA does not ity of state regulatory arrangements which enacting the Douglas Amendment is more impinge those rights found to be fundamen discriminate in favor of residents of selected fully discussed below, infra at 15-27, and, tal by the Sl,lpreme Court or employ inher for reasons stated therein, the Douglas ently suspect classifications, it will not be regional groupings of states and exclude closely scrutinized by the courts under the residents of all other states from the bene Amendment should be read as a renunci fits provided to the regional groups. 5 ation of federal interest in regulating the Equal Protection Clause. interstate acquisition of banks by bank Thus, Connecticut can advance a suffi holding companies. As a result CIBA does ciently rational purpose in enacting CIBA to Footnotes at end of article. not appear to violate the Compact Clause. meet the less stringent scrutiny of the September 11, 1981,. CONGRESSIONAL RECORD-SENATE 24757 courts under the "rational purpose" test. On by the certainty that he will have free gional banking zone at issue in this case is this basis, CIBA does not appear to violate access to every market in the Nation, that clearly an example of the regulatory rather the Equal Protection Clause of the Four no home embargoes will withhold his ex than proprietary function of the State of teenth Amendment. ports, and no foreign state will by customs Connecticut, and Connecticut is not itself CONSIDERATIONS UNDER THE COMMERCE duties or regulations exclude them. Like creating commerce by its own direct inter CLAusE wise, every consumer may look to the free vention in the marketplace. The reliance of BNE and CBT assert that Congress, in the competition from every producing area in BNE and CBT on the Alexandria Scrap ra Douglas Amendment, conferred upon each the Nation to protect him from exploitation tionale thus appears to be misplaced and. in state complete authority to permit, regulate by any. Such was the vision of the Found fact, succeeding Supreme Court decisions or condition the entry into the state by out ers; such has been the doctrine of this Court seem to limit the Alexandria Scrap reason of-state bank holding companies for the which has given it reality. ing to those situations where the states are purpose of engaging in banking activities. H. P. Hood & Sons, 336 U.S. at 538-39 0976). In Alexandria Scrap, the ination provided for by CffiA. The Douglas need only consider the consequences if each Supreme Court upheld a Maryland statute Amendment provides: of the few states that produce copper, lead, that paid a bounty for destruction of any "Notwithstanding any other provision of high-grade iron ore, timber, cotton, oil or junked car formerly titled in Maryland de this section, no application shall be ap gas should decree that industries located in spite a challenge that the statute made it proved under this section which will permit that state shall have priority. What fantas easier for Maryland scrap processors to any bank holding company or any subsidi tic rivalries and dislocations and reprisals prove that a vehicle had been titled in ary thereof to acquire, directly or indirectly, would ensue if such practices were begun! Maryland than it did for out-of-state proces any voting shares of, interest in, or all or Our system, fostered by the Commerce sors. The Court held that where a state substantially all of the assets of any addi Clause, is that every farmer and every acted as a market participant the Commerce tional bank located outside of the State in craftsman shall be encouraged to produce Clause did not apply.20 The Connecticut re- which the operations of such bank holding 24758 CONGRESSIONAL RECORD-SENATE September 11, 1984 company's b&nldng subsidiaries were princi interstate commerce was demonstrated by clearly more concerned with the federal pally conducted on July 1, 1966, or the date 37 federal statutes in which Congress had prohibition on interstate acquisitions than on which such company became a bank indicated its intent not to preempt state on terms under which the states could lift holding company, whichever is later, unless water laws and by congressional authoriza this ban. the acquisition of such shares or assets of a tion of certain interstate surface water com In his remarks during the Senate debate, State bank by an out-of-state bank holding pacts. The Court rejected this argument, Senator Douglas, sponsor of the Amend company is specifically authorized by the holding that these federal statutes did not ment, referred to the ability of the states to statute laws of the State in which such show an "expressly stated" intention to permit the entry of out-of-state bank hold bank is located. by language to that effect remove Commerce Clause restraints on ing companies "only to the degree that state and not merely by implication. For the pur state water laws. Similarly, in New England laws expressly permit them." 11 He also poses of this section, the State in which the Power Company v. New Hampshire, 455 U.S. stated that the Amendment paralleled the operations of a bank holding company's sub 331, 341 <1982), and in Lewis, supra, the McFadden Act restrictions on the power of sidiaries are principally conducted is that Court held that federal statutes reserving to national banks to branch intrastate and State in which total deposits of all such the state residual authority over export of interstate "in a way contrary to State bank.lng subsidiaries are largest." electricity or over bank holding companies policy." 82 Thus it can be persuasively 12 U.S.C. § 1842. The Supreme Court were in no sense affirmative grants of power argued that Senator Douglas construed his in Lewis, supra, 447 U.S. at 47, described to the state to impose undue burdens on amendment as granting plenary power to this language as establishing a general fed interstate commerce. The Court may have the states to set their own policies and to eral prohibition on acquisition or expansion relaxed this high standard somewhat in permit entry of out-of-state bank holding of bank.lng subsidiaries across state lines White v. Massachusetts Council of Construc companies to the degree that they chose. and as conferring on the states only "au tion Employers, 103 S. Ct. 1042 <1983>, However, there is also an argument that the thority to create exceptions to this general where it approved geographic restrictions excerpts from the Senate debate are too prohibition." on the hiring of non-resident workers for fragmentary and unspecific to show con It is clear that if Congress, in the Douglas city-funded construction projects, relying gressional intent to authorize diserim1nation Amendment, authorized discriminatory upon the explicit regulations of the Depart otherwise contrary to the Commerce state action, CIBA would not be unconstitu ment of Housing and Urban Development Clause, especially where the Supreme Court tional under the Commerce Clause. In the and a general, unspecific authorization in has required such explicit and clear authori specific context of the Douglas Amendment, federal statute for such regulations. zation of discrimination by the Congress be the Supreme Court has stated that Con Based on these requirements for specifici cause of the fundamental implications of gress may prohibit as well as promote com· ty, the Douglas Amendment does not such discrimination for the federal union. meree 13 and may exercise its plenary power appear on its face to authorize discrimina The Board has a limited amount of judi under the Commerce Clause "by conferring tion by Connecticut in favor of its own resi cial guidance on this issue. The only court upon the State an ability to restrict the flow dents and those of Massachusetts and other to consider the legislative history of the of interstate commerce that they would not New England states having reciprocal laws, Douglas Amendment has been the U.S. otherwise enJoy." Lewis v. RT Investment but against all other states. The Douglas Court of Appeals for the District of Colum Managers. Inc., 447 U.S. 27, 44 <1980). 24 The Amendment's general authorization to the bia Circuit in Iowa Independent Bankers As issue presented by CIBA is the extent of a Board of Governors to permit interstate ac sociation v. Board of Governors, 511 F.2d state's powers when it decides to lift the quisitions if they are " . . . specifically au 1288, 1293 <1975>. The case involved, in part, Douglas Amendment prohibition. Does the thorized by the statute laws of the State in a challenge under the Equal Protection Douglas Amendment, which establishes a which such bank is located, by language to Clause of the Fourteenth Amendment to total prohibition on acquisitions by out-of that effect and not merely by implication.'' the Iowa statute that permitted, on the state bank companies, authorize a state to does not appear to meet the stringent test basis of their location in the state prior to discriminate among the states when it per of explicitness laid down by the Supreme the enactment of the Bank Holding Compa mits entry? Does the Douglas Amendment Court. ny Act Amendments of 1970, out-of-state permit Connecticut to admit bank compa BNE and CBT argue, however, that the bank holding companies operating two or nies from neighboring Massachusetts and legislative history of the Douglas Amend more banks in Iowa to continue to expand other New England States meeting certain ment indicates the intention of the Con and to acquire new banks in Iowa on the qualifications regarding reciprocity but not gress to give the states complete discretion same basis as a local bank holding company. from other states even if they were to meet in setting the terms of entry of out-of·state A less stringent standard applies to state the reciprocity qualifications? bank holding companies without the limita action under the Equal Protection Clause It is, therefore, necessary to determine tions imposed by the Commerce Clause. than under the Commerce Clause. Under the scope of authorization, if any, for states While the reliance on the legislative history the former provision a state need only show to discriminate among other states in lifting is a valid method of determining that Con that its economic legislation, presuming it the Douglas Amendment's ban against gress authorized the lifting of Commerce does not affect fundamental rights or create interstate acquisition of banks by bank com Clause restrictions with respect to a particu a suspect classification, bears a rational re panies. This task is more difficult because, lar state enactment, the Supreme Court has lationship to a legitimate state purpose. as noted above, this ease involves an unusu expressed reluctance to place undue weight Under the Commerce Clause, however, dis al form of discrimination. There is a long on this type of inquiry in an attempt to find crimination is disabling per se, and even history of decisions of the Supreme Court authority from Congress for states to dis when a statute only imposes an incidental and lower federal courts involving the appli criminate against the residents of other burden on interstate commerce it will be cation of the Commerce Clause to state laws states. The Court stated: struck down if such burden is clearly exces that provide a preference for their own resi "Reliance on . . . isolated fragments of sive in relation to expected local benefits. dents as against those of all other states. No legislative history in divining the intent of The Court upheld the constitutionality of ease has been found under the Commerce Congress is an exercise fraught with haz the Iowa statute under the Equal Protection Clause or generally in the literature on this ards and "a step to be taken cautiously." Clause on the basis that it was actually a Clause, in which a state has provided for New England Power, 455 U.S. at 341, quot statute that conferred grandfather rights preferential treatment of its own citizens ing Piper v. Chris-Craft Industries, Inc., 430 on the only out-of-state bank holding com and those of selected other states, while ex U.S. 1, 26 <1976). When Congress has not ex pany operating in Iowa. eluding the residents of all other states pressly stated an intent to permit state leg The Court then turned to petitioners ar from this favored treatment. islation otherwise inconsistent with the gument that the Iowa statute conflicted In deciding eases where the differential Commerce Clause, the Court has no author with federal law, specifically with the Doug treatment is applied against all other states ity to rewrite the legislation "based on mere las Amendment. Petitioners in Iowa Inde equally, the Supreme Court requires, in speculation of what Congress probably had pendent Bankers advanced the argument order to find an authorization for discrimi in mind." Id. at 343. 118 that the Iowa statute conflicted with "im nation in federal statutes, that such author The Douglas Amendment was proposed plicit . . . prohibition against discrimination ization be "expressly" 16 or "explicitly" 18 or during the debate on the Senate floor and between out-of-state bank holding compa "specifically" 27 stated in federal law. In there is no committee report or other signif nies," as which, they asserted, was intended Sporhase v. Nebraska, 458 U.S. 941, 960 icant legislative history to clarify its mean· by Congress in the Douglas Amendment. <1982), defendants challenged a Nebraska ing. 211 There was very little discussion of the They argued that under the Douglas law restricting the export of ground water power of the state to override the interstate Amendment states may only decide "wheth as an Impermissible burden on interstate banking ban Imposed by the Douglas er to extend the right to acquire in-state commerce. Nebraska argued in defense of its Amendment and no discussion of the power banks to all out-of-state bank holding com statute that the congressional intent to au of the states to discriminate among poten panies or to prohibit such acquisitions en thorize otherwise impermissible burdens on tial out-of·state entrants.3 ° Congress was tirely.",. The Court then reviewed the lim- September 11, 1984 CONGRESSIONAL RECORD-SENATE 24759 ited legislative history of the Douglas in the furtherance of legitimate state objec Maryland "created a market that did not previously Amendment and these arguments, finding tives that CIBA imposes. exist,'' it could not be found to burden commerce. 426 U.S. at 815-816. that Congress did not Intend to bar discrimi I'OOTNOTES U"[Tlhe Commerce Clause responds principally nation like that embodied In the Iowa stat 1 New England bank holding companies Include to state taxes and regulatory measures impeding ute. The Court also stated that the Douglas those with their principal place of buainess in Con private trade in the national marketplace. . .. Amendment conferred on the states a right necticut. Maine. Massachusetts. New Hampshire, There is no indication of a constitutional plan to to control the expansion of Interstate bank Rhode lal&nd. and Vermont. The Connecticut stat llmit the ability of the States themselves to operate Ing "so that such expansion would not con ute further restricts the def1n1tion of "New Eng freely in the free market." Id. at 436-437 . See also White v. Mcusachuaetta Council The Court's review of the legislative histo ing companies directly or indirectly controlled by of Conatruction Emplo1/en, 103 S. Ct. 1042 <1983>; bank holding companies outside of New England. United Building & Conatruction 7'rada Council v. ry of the Douglas Amendment In Iowa Inde CIBA thus prohibita non-New England bank hold Mayor & Council oJ Camden, 52 U.S.L. W. 4187 pendent Banken was not conducted for pur ing companies from "leapfrogging" into the Con . against Interstate commerce that would oth of cooperation on a subject matter of exclusive in u See also Pnutentialimurance at 423-24. erwise run afoul of the Commerce Clause. terest to the states that are parties to these agree u New England Power Co. v. New HamJ)Bhire, 455 menta. See. e.g., Wcuhington Metropolitan Area u.s. 331, 340-41 <1982). The actions of the states and the Board In Tran.rit Authority v. One Parcel oJ Land, 706 F.2d Interpreting and applying the Douglas .. Western and Southern Life Imurance Co. v. 1312, 1314 (4th Ctr.>, cert. denied, 104 S. Ct. 238 State Board of Equalization, 451 U.S. 648, 653-654 Amendment also lend some support to the <1983>; Jacobson v. Tahoe Regional Planning <1981). position that the Amendment authorizes Agency, 566 F.2d 1353, 1357 <9th Cir. 1977>, aJFd in n White v. Mcuaachuaetta Council of Conatruction the states to permit restricted or conditional part and rev'd in part sub nom. Lake Country Es Employers, 103 S. CL 1042 (1983). entry of out-of-state bank holding compa tatu, Inc. v. Tahoe Regional Planning Agency, 440 u The court has allowed dlscr1m1nation against u.s. 391 (1979). other states generally based upon a clear statement nles such as sanctioned by CIBA. As early as • Art. I. t 10, cl. 3. This clause has been invoked in 1972, Iowa enacted a statute that accorded of congressional intent contained in the legislative frequently, particulary in recent years when ex history of a federal statute. Relying on the clearly certain grandfather rights to expand and to panded interpretation of what constitutes inter expressed intention of Congress, derived from the make additional acquisitions to out-of-state state commerce has meant that agreements among legislative history, to leave insurance regulation ex bank holding companies already controlllng states more frequently might be invalidated as bur clusively to the states, the Court bas found the two or more banks In Iowa 311 -establlshing, dening interstate commerce in violation of the McCarran-Ferguson Act, 15 U.S.C. t 1011 et seq., to Commerce Clause. authorize discrlminatory state statutes that would In fact, a preference for a particular out-of 1 See United States Steel CoTJ)oration Multi v. otherwise offend the Commerce Clause. Prudential state bank holding company against all state Ta.x Commission, 434 U.S. 452 <1978>; Virginia Imurance Company v. Benjamin, 328 U.S. 408, 427- other non-resident companies. Recently, Ne v. Tennusee. 148 U.S. 503 <1893). 31 In • See Transcripts of Connecticut Senate Debate, 432 <1946>, and Western and Southern Life Insur braska enacted a similar statute. addi ance Co., supra. 451 U.S. at 465. 38 311 May 18, 1983 <"Conn. Sen. Debate"> at 61, 96 ; Transcripts of Connecticut House of Rep and Nebraska have permitted out-of-state Record 6750-58 and 685H2 <1956). resentatives Debate, May 26, 1983 <"Conn. House 3 bank holding companies to acquire local Debate"> at 224, 234, 236 and 276, o See Iowa Independent Bankers v. Board oJ banks under certain conditions, Including 277 . Governon of the Federal Reserve System, 511 F.2d llmltations on activities, number of offices 1288 ; Iowa Independent Bankers Auocia "£Wlhat our amendment aims to do is to carry over into the field of holding companies the same posed on In-state bank holding companies. tion v. Board of Governon, 3UPra. 10 See Minnuota v. Clover Lea/ Creamery Co., 449 provisions which already apply for branch banking One of the major purposes of such legisla under the McFadden Act-namely, our amendment tion Is to gain employment for local resi U.S. 456, 461-463 <1981>; Western and Southern Life Imurance Co., 451 U.S. at 668. will permit out-of-State holding companies to ac· dents and tax revenues for the state without 11 "The Report to the General Assembly of the quire banks in other States only to the degree that seriously affecting competing local banking State of Connecticut of The Commission to Study State laws expressly permit them; and that is the businesses; the statutes accomplish this by Legislation to Limit the Conduct of Business in provision of the McFadden Act." 102 Cong. Record permitting out-of-state bank holding compa Connecticut by Subsidiaries of Bank Holding Com 6858 <1956). nles to export their credit card operations to panies," January 5, 1983 <"The Hebb Report"), pp. u "[The amendment] is a logical continuation of states with less restrictive usury laws. Siml 10, 12-13. the principles of the McFadden Act, which tried to 11 U.S. Const., Art. I, t 8, cl. 3. prevent the Federal power from being used to lary, South Dakota has recently permitted "Great Atlantic and Paci/ie Tea Company v. Cot permit national banks to expand across State lines the entry of out-of-state bank holding com trell. 424 U.S. 366, 370-71 <1976). in a way contrary to State policy and. of course, panies on a limited basis to acquire a state ,.Philadelphia v. New Jersey, 437 U.S. 617, 624 under the McFadden Act, even to expand witbtn a bank with a broad range of insurance <1978). State." 102 Cong. Record 6860 <1956). powers. n The Board has approved a •• Let.oU v. BT Investment Management, Inc., 447 ..Iowa Independent Banken, supra. 511 F.2d at number of applications by out-of-state bank U.S. at 27, <1980). See also Philadelphia v. New 1296. Jeney, 3UPra. at 626-627. .. Ibid. holding companies to acquire local banks •• Philadelphia v. New Jersey, supra. at 624. .. Id. at 1297. In Conference of State Bank Super under the credit card or grandfather stat 11 Hughes v. Oklahoma, 441 U.S. 322, 336 <1979>; vison v. Conover, 715 F.2d 604, 615 <1983). The utes43 and, as noted above, the U.S. Court Pike v. Bruce Church, Inc., 397 U.S. 137, 142 <1970). Court of Appeals for the D.C. Circuit restated its of Appeals for the District of Columbia has "See Dean Milk Co. v. Madison, 340 U.S. 349 conclusion that the legislative history of the Doug upheld a Board order under the Iowa stat <1951) ; Pennaylvania v. West Virginia. 262 U.S. 553 "Neb. Rev. Stat. t 8-903 ; H.P. Hood & "'Va. Code § 6.1-390 to 6.1-397. bank holding companies.411 Nothing In the Sona v. DuMond, 336 U.S. 525 <1949) (denial of a 41 Neb. Rev. Stat. §§ 8-905, 8-906 ; Philadelphia v. New Jersey, 437 U.S. 617 42 See, e.g., Citicrop, 67 Fed. Res. Bull. 181 <1981>; choose between not allowing out-of-state <1978) ; Northwest BancoTJ)Oration, 38 Fed. Reg. Ing completely free entry. 411 In approving lected outside the State of New Jersey>; Let.oU v. 21,530 (1973). applications under these statutes, the Board BT Investment Managers, Inc., 447 U.S. 27 <1980) "Iowa Independent Banken Auociation, 3Upra. appears to have accepted at least some . troubled bank in need of financial assistance also 11 The Hebb Report, 3UPTa. at 12. See also Conn. allow the states to condition entry. See, for exam conclusion would seem to raise some ques Sen. Debate, 3UPTa. at 60, 64, 70 and Conn. House Debate at 241, 258 "Senator Robertson. Chairman of the Senate cited above, although it would appear that . Committee on Banking and Currency, suggested by such statutes might be viewed as imposing 10In hJs concurring opinion, Justice Stevens sug hJs comments in the 1956 debate on the Bank Hold substantially less of a burden on commerce gested that the decision In effect held that, since ing Company Act that Congress may have intended 24760 CONGRESSIONAL RECORD-SENATE September 11, 1984 to give the states more authority than merely to <1> Bank of New England Corporation found that "the Douglas Amendment allow unrestricted entry of out-of-state bank hold <"BNE"), a Massachusetts bank holding be ing companies. Senator Robertson suggested that should read as a renunciation of federal states should be permitted to retain the authority company, to acquire CBT Corporation interest in regulating the interstate acquisi to permit acquisitions by out-of-state bank holding <"CBT"), a Connecticut bank holding com tion of banks by bank holding companies." companies in the limited case where a troubled pany; The Board also found no "clear and un bank might require financial assistance. 102 Cong. <2> Hartford National Corporation equivocal" basis for finding the Connecticut Record 6572 <1956). <"HNC"), a Connecticut bank holding com statute unconstitutional [U.S. Court of Appeals for the Second Cir pany, to acquire Arltru Bankcorporation cuit Nos. 1378, 1379, 1380, August Term, <"Arltru"), a Massachusetts bank holding (2) THE HNC APPLICATION 1983 , for Petitioners Northeast House of Representatives, banned interstate acquisition of banks by bank holding compa Bancorp, Inc. and Union Trust Company. acquisitions. See H.R. Rep. No. 609, 84th nies." The Board also found no "clear and James W. Quinn, New York, N.Y. , for Petitioner Citicorp. Senate Committee contained no provision James E. Scott, Washington, D.C. , ment). The Douglas Amendment provided tion of Colonial. By notice published in the for Respondent Board of Governors of the that no application by a bank holding com Federal Register dated February 16, 1984, Federal Reserve System. pany to acquire a bank located in another the Board invited comment on BBC's appli Bertram M. Kantor, New York, N.Y. , for In had, by statute, specifically authorized such plication. On May 18, 1984 the Board ap tervenor CBT Corporation. acquisition. 3 proved BBC's proposed acquisition of Colo , for Interve ferred to as the Massachusetts and Con findings with respect to the applications of nor Bank of New England Corporation. necticut statutes, respectively> to permit BNE and HNC, the Board refused to find William Hughes Mulligan, New York, N.Y. interstate bank acquisitions. The Massachu the Connecticut statute unconstitutional, , for Intervenor Hart setts, provided that the New England state titions for review of the orders of the Board ford National Corporation. in which such bank holding company was approving the BNE-CBT and HNC-Arltru Jamie W. Katz, Asst. Attorney General, located had granted reciprocal privileges to acquisitions. 12 The petitions were consoli The Commonwealth of Massachusetts, bank holding companies located in Massa dated and the acquisitions stayed pending Boston, Mass., Francis X. Bellotti, Attorney chusetts. The Connecticut statute contained review by this court of the orders of the General, for Intervenor Commonwealth of a similar provision. • Board. BNE, CBT, HNC, the State of Con Massachusetts. <1) THE BNE APPLICATION necticut and the Commonwealth of Massa John G. Haines, Asst. Attorney General, chusetts were permitted to intervene. Hartford, Connecticut , for In agreement to acquire CBT under the au Fed. R. App. P. 15, BBC moved for leave tervenor State of Connecticut and Brian J. thority of the Connecticut statute. On to intervene, which motion was granted by Woolf, Banking Commissioner. August 5, 1983, pursuant to Sections 3 and this court on June 18, 1984. BBC also moved Stuart C. Stock, Washington, D.C. , for In Board for approval of its proposed acquisi review filed in its action with the petitions tervenor Bank of Boston Corporation. tion of CBT. By notice published in the Fed pending before the court. This motion was Bonsai, District Judge: eral Register dated September 15, 1983, the also granted by this court on June 18, 1984. Board invited comment on BNE's applica Petitioners Citicorp <"Citicorp"), North Discussion east Bancorp, Inc. together with Northeast's tion.5 Citicorp and Northeast opposed the subsidiary bank, Union Trust Company petition Northeast had instituted challenging the applications of BNE, HNC, and BBC be this court to review three orders of the constitutionality of the Connecticut statute, cause the Massachusetts and Connecticut which litigation was dismissed on December statutes, by limiting interstate acquisitions Board of Governors of the Federal Reserve 6 System of the Bank Holding proved BNE's proposed acquisition of CBT bank holding companies located in other Company Act of 1956 ; Prudential Insurance Co. v. premacy of the United States." United as Section 3(d) of the BHCA. The Douglas Benjamin, 328 U.S. 408, 434 <1946). The States Steel Corp. v. Multistate Tax Commis Amendment provided that no application by Commerce Clause has been interpreted to sion, 434 U.S. 452, 471 <1978) (quoting Vir a bank holding company to acquire a bank limit the power of the states to interfere ginia v. Tennessee, 148 U.S. 503, 519 <1893)); located in another state could be approved with or impose burdens on interstate com New Hampshire v. Maine, 426 U.S. 363, 369 by the Board unless the state in which such merce. Western & Southern Life Insurance (1976). bank was located had specifically authorized Co., 451 U.S. at 652; Lewis v. BT Investment As a practical matter, we do not think such acquisition by statute.13 In describing that a New England bank holding company his proposed amendment, Senator Douglas Manager, Inc., 447 U.S. 27 34-36 0980>; Great Atlantic & Paei./ic Tea Co. v. Cottrell, system would in any way increase the politi stated: 424 U.S. 366, 370-71 <1976). However, if Con cal power of the New England states or en "What our amendment aims to do is to gress authorizes the states to regulate some croach upon or interfere with the just su carry over into the field of holding compa aspect of interstate commerce, any action premacy of the United States. However, if nies the same provisions which already at any time Congress should find any en apply for branch banking under the McFad taken by a state within that authority is "invulnerable" to challenge. Western & croachment, it could remove the encroach den Act-namely, our amendment will ment by appropriate legislation. permit out-of-State holding companies to Southern Life Insurance Co., 451 U.S. at acquire banks in other States only to the 652-53. Moreover, Congress may authorize EQUAL PROTECTION CLAUSE degree that State laws expressly permit the states to enact statutes which may Petitioners argued before the Board that them.... " 102 Cong. Rec. 6858 <1956). interfere with interstate commerce. Such the Massachusetts and Connecticut statutes At the time the Douglas Amendment was statues do not violate the Commerce Clause. were unconstitutional in violation of the enacted, no state permitted interstate acqui White v. Massachusetts Council of Construc Equal Protection Clause of the Fourteenth sitions by bank holding companies. There tion Employers, 460 U.S. 204 <1983). Howev Amendment. The Equal Protection Clause fore, Senator Douglas observed that the im er, congressional authorization must be provides: "No State shall . . . deny to any mediate effect of the amendment would be clear. South Central Timber Development, person within its jurisdiction the equal pro "to bar the expansion of bank holding com Inc. v. Wunnicke, -- U.S. -- <1984>; tection of the laws." U.S. Const., Amend. White, 460 U.S. at-- <1983); Western & panies across State lines." 102 Cong. Rec. at XIV, § 1. Petitioners contend that by only Southern Life Insurance Co., 451 U.S. at 6860. "But," he added, "the amendment 653-54. We believe that, by enacting the allowing New England bank holding compa would leave the way open for States to Douglas Amendment, Congress authorized nies to acquire Massachusetts and Connecti make explicit provision for such purchases Massachusetts and Connecticut to enact the cut banks, the Massachusetts and Connecti and acquisitions if they so decided." id. statutes challenged here. cut statutes discriminate against non-New The Board, after reviewing its legislative For the reasons above stated, we conclude England bank holding companies in viola history, found the Douglas Amendment to that the Massachusetts and Connecticut tion of the Equal Protection Clause. be a "renunciation of federal interest in reg statutes do not violate the Commerce This type of legislation violates the Equal ulating the interstate acquisitions of banks Clause. Therefore, the Board, in approving Protection Clause only if "the varying treat by bank holding companies." As recently the acquisitions, properly concluded that ment of different groups or persons is so un pointed out by the Supreme Court in Secu there was no such violation. related to the achievement of any combina rities Industry Association v. Board of Gov tion of legitimate purposes that we can only ernors of the Federal Reserve System. - COMPACT CLAUSE conclude that the legislature's actions were U.S. -- <1984), "[tlhe Board is the The Compact Clause of the Constitution irrational." Barry v. Barchi, 443 U.S. 55, 67 agency responsible for federal regulation of provides that "[nlo State shall, without the <1979) (quoting Vance v. Bradley, 440 U.S. the national banking system, and its inter Consent of Congress, . . . enter into any 93, 97 <1979)). We do not believe that the pretation of a federal banking statute is en Agreement or Compact with another State, Massachusetts and Connecticut statutes evi titled to substantial deference." or with a foreign Power.... " U.S. Const., dence such irrationality. Rather, because The Douglas Amendment prohibits the Art. I, § 10, cl. 3. "banking and related financial activities are Board from approving applications by bank Petitioners contend that the Board's ap of profound local concern, "Lewis, 447 U.S. holding companies to acquire banks located proval of the BNE-CBT, HNC-Arltru, and at 38, the Massachusetts and Connecticut in other states unless the state in which the BBC-Colonial acquisitions should be re statutes appear to be designed to foster bank is located has enacted a statute "spe versed because the Massachusetts and Con banking and related activities in those cifically authorizing" such acquisitions. The necticut statutes which authorized them states and in neighboring New England Massachusetts and Connecticut statutes were enacted pursuant to an interstate com- states. Massachusetts and Connecticut may 24762 CONGRESSIONAL RECORD-SENATE September 11, 1984 be concerned that their banks could be 11 According to statistics published by the Asso procity for D.C., Maryland, and Virginia in dominated by large bank holding companies ciation of Bank Holding Companies, each of the the 98th Congress. located in New York or Chicago if such four largest New York bank holding companies baa greater assets than those of all the New England D.C. Bankers Association is expected to holding companies were allowed to acQuire bank holding companies combined. Association of propose regionally reciprocal banking legis 1 their bariks. • Therefore, we find no viola Bank Holding Companies, Bank Holding Compantf lation which, if adopted by the City Council, tion of the EQual Protection Clause. See Facta . would allow mergers with banks in the genera.Uy lo'IDG. Independent Bankers, 511 F. Southeast. :ld at ~294-96. REVIEW or STATE BA.HKIBG STATUTES .urn FLORIDA In view of the foregoing, we affirm the LI:GISLATION CONCERNED WITH ExPANSION On May 16, 1984, the Florida legislature orders of the Board approving the applica ACROSS STATE LI:lus-SEPTDOER 4, 1984 tions ot BNE, HNC, and BBC. passed a regional reciprocity bill, which ALABAKA Governor Bob Graham signed into law on Mfirmed. A gubernatorial task force designed to May 22; states included are Alabama, Ar POOTNOTES study and develop interstate banking pro kansas, Georgia, Louisiana, Maryland, Mis •of the Southern District of New York, sitting by posals has been appointed; it is llkely that a sissippi, North Carolina, South Carolina, deallnation. regionally reciprocal banking bill w1ll be in Tennessee, West Virginia, and the District 1 12 U.S.C. 11841 defines a "bank." in relevant troduced in the legislature in January, 1985. of Columbia; acquired banks must have part, as an "institution ... which <1> accepts depos Independent bankers have opposed bank been in existence at least five years; the law Ita that the depositor baa a lepl right to withdraw expansion legislation, while the four major becomes effective July 1, 1985. on demand, and <2> engages in the business of m.aking commercial loans." bank holding companies are split on this GEORGIA issue; this, combined with procedural diffi • Bank holding companies are generally prohibit Enacted a regionally reciprocal banking culties, w1ll make passage of such legislation ed from owning Stock in companies other than law on Aprtl 5, 1984, to take effect July 1, in the near future difficult. bank.a. 1985 of the BHCA, 12 U.S.C. 11842 Contained in several Southeastern region provides: statutes/proposals. states pass regional laws before then>. "Limit4tion b1l SttJ.t~ boundartu. Notwithstand Banks at least five years in existence can Ing any other provision of this section, no applica ALASKA be purchased by a Southeastern of the ship of banks or bank holding companies. North Carolina, South Carolina, Tennessee, Federal Deposit Insurance Act £12 U.S.C. 11823 and Virginia) bank holding company head (f)]) shall be approved under this section which will ARIZONA permit any bank holding company or any subsidi Quartered in a state with reciprocal privi Gubernatorial task force now studying leges. ary thereof to acquire, directly or indirectly, any interstate banking. voting shares of, interest In, or all or substantially HAWAII all of the assets of any additional bank located out In the 1984 legislative session H.B. 2117 side of the State In which the operations of such would have permitted regional banking with Contained in Utah's Western region stat bank holding company's bank.inr subsidiaries were Colorado, New Mexico, and Utah; regional ute. principally conducted on July 1, 1966, or the date banking is again expected to be considered mAHO on which such company became a bank holding in 1985. company, whichever Ia later, un.Zua the acquUition Arizona Bankers Association has suggest State Legislature is expected to consider a oJ auch aharea or a.ueta oJ a State bank b1l an out-of ed phased-in reciprocal interstate banking, regional bank.ing measure in early 1985; the State bank holding compantf ia a.J)eCiJ'icalltf author first with the above states, then adding Cali Idaho Bankers Association supports such ized b1l the atatute lawa oJ the State in which aueh fornia, and finally nationwide. legislation. bank ia located, b1l language to that effect and not Contained in Utah's Western region stat mereltf b1l implication. For the purposes of this sec ARKANSAS ute. tion, the State In which the operations of a bank holding company's subsidiaries are principally con Bank holding companies headquartered ILLINOIS out-of-the-state are prohibited from acquir ducted Ia that State in which total deposits of all A meeting of Midwestern bank regulators such bank.inr subsidiaries are largest." (Emphasis ing control of an Arkansas bank under the added.) 1983 "Bank Holding Company Act." and governors' aides to discuss regional • Mass. Gen. Laws Ann. ch.167 A. 1 2 ; 1983 Conn. Act 83-411 . Rhode banking concepts with a view toward the August, 1984. Island baa enacted a similar statute effective July 1985 legislative session. H.B. 1063, which passed the House Finan 1, 1984, which Ia limited to New England acquisi cial Institutions Committee 10-6 in early tions for two years after its effective date. R.I. Gen. CALIPORNIA May, would permit nationwide reciprocal Laws 1119-30-1, 19-30-2 <1984). A.J. Res. 96 would urge the repeal of the banking; this legislation did not reach the • Application Notice, 48 Fed. Reg. 41,524 <1983). McFadden Act and Douglas Amendment; House floor before the legislature ad • On July 29, 1983 Northeast filed an action In the U.S. District Court In Connecticut against the Con pending. journed; reciprocal bank.ing action is antici necticut Bank..1nr Commissioner. On December 16, A.B. 2094, which would have permitted re pated in 1985. 1983 Northeast's complaint was dismissed on the ciprocal nationwide interstate banking, died Barry Sulllvan, Chairman, First Chicago ground that Northeast lacked standing to challenge in Committee January 1984. Corp., expressed support for regional state the constitutionality of the Connecticut statute. California Bankers Association favors na statutes in an Aprtl, 1984 speech. Northefut BancoT.J), Inc. v. Woolf, 576 F. Supp. 1225 tionwide interstate bank.ing and opposes re Governor James Thompson signed legisla . ings and loans died in the Colorado House • Harl.!ord National CoT.POration, 70 Fed. Res. billion in assets, must request an out-of in 1984 by a vote of 5-4 in the Business Af Bull. 353 <1984). state takeover, and must be certified as •o Application Notice, 49 Fed. Reg. 6012 <1984>. fairs and Labor Committee; it is expected troubled by state and federal regulators; that in 1985, a regional bank.ing bill w1ll be •• Bank oJ Boaton CoT.POration, 70 Fed. Res. Bull. such a merger can only take place in the ab 524 <1984). considered. •• Section 9 of the BHCA <12 U.S.C. 11848> pro sence of an adeQuate in-state offer and after vides that any party aggrieved by an order of the CONNECTICUT a two-week notice of emergency is given. Board may petition for a review of the order In the Permits regionally recipro INDIANA United States Court of Appeals and that the Court cal expansion. shall have Jurlsdlction to affirm, set aside, or Prohibits the establishment of limited Reciprocal bank.ing action expected in modify the Board's order. service banks for entities headquartered 1985, following the Indiana Bankers Asso u Section 3 of the BHCA allows the Board to outside of the state. ciation June, 1984 announcement that it approve the acquisition of both banks and bank favors contiguous state reciprocal banking. holding companies. DELAWARE Considered for participation in a Great •• Section 7 of the BHCA <12 U.S.C. 11846> pro Permits the establishment of a single lim Lakes or Midwestern region; would be eligi vides: "Ruerva.tion oJ right& to Statu. The enactment ited-service bank in the state by an out-of ble for reciprocity as a contiguous state by the Congress of this chapter shall not be con state entity. under a proposed Ohio law. strued as preventing any State from exercising State legislature may consider bank ex IOWA such powers and Jurlsdlctlon which it now has or pansion legislation in 1985. Grandfathers certain out-of-state bank may hereafter have with respect to banks, bank DISTRICT OP COLUKBIA holding companies, and subsidiaries thereof." holding companies. u Me. Pub. Law 1983, ch. 302, 1 2, as amended Representative Fauntroy introduced legis Regionally reciprocal bills failed in Com <1984). lation, H.R. 4008, to permit regional reel- mittee in both Houses of the State Legisla- September 11, 1984 CONGRESSIONAL RECORD-SENATE 24763 ture In 1984; a Midwestern region of Dlinois, January, 1985; the regional banking mess ORBGON Kansas, Minnesota, Missouri, Nevada, North ure wtll Include Kentucky, Tennessee, Dli A task force studying Interstate banking Dakota, South Dakota, and Wisconsin was nols, Nebraska, Iowa, Kansas, Oklahoma, wtll make recommendations to the legisla proposed; action Is expected again In 1985. and Arkansas. ture In 1985. KANSAS KONTANA Permits the acquisition of mutual savings Probable candidate for a Midwestern Contained In Utah regional statute and banks In danger of failure. region. considered In other Western/Midwestern/ Contained In Utah's Western regional Bank expansion legislation Is likely In North Central proposals. statute. 1985. NEBRASKA PENNSYLVANIA KENTUCKY A bill establishing a North Central region Considered for participation In a Central Permits reciprocal bank acquisition for of Iowa, Missouri, Kansas, Colorado, Wyo- Atlantic regional proposal; would be eligible contiguous states for two years after July m.ing, Montana, Minnesota, Wisconsin, for reciprocity as a contiguous state under a 14, 1984; this is to be followed by nationwide North Dakota, and South Dakota died 1n proposed Ohio law. reciprocity. Committee In February, 1984. State bankers association task force is Acquisitions are limited to three banks per Permits grandfathered activities by cer- studying regional banking options. year for five years, provided no single bank tain OUt-Of -state banks. RHODE ISLAND controls in excess of 15% of the state's de posits; a bank must be five years old to be NEVADA Permits New England regionally recipro- acquired. Senate Banking Committee has Indicated cal expansion; allows nationwide reciprocity LOUISIANA a willingness to endorse a regionally follow- after July 1, 1986. Contained in Georgia regional statute and lng a law passed In special session on March soUTH CAROLINA other Southeastern proposals. 29. The State enacted a regionally reciprocal NEW HAKPSHIRE KAINE banking statute permitting acquisition of es- A study commission 1s currently reviewing tablished South Carolina banks by banks In Non-reciprocal acquisition of Maine banks Interstate banking in preparation for the a Southeastern region composed of Ala- has been permitted since mid-February, 1985 state legislative session. bama, Arizona, District of Columbia, Flori- 1984. Nationwide reciprocal interstate legisla- da, California, Kansas, Louisiana, Maryland, MARYLAND tion is expected to be introduced in 1985. Mississippi, North Carolina, South Carolina, Permits the control of a limited-purpose Tennessee, Virginia, and West Virginia; this bank by out-of-state entitles. NEW JERSEY measure was signed by Governor Riley on House of Delegates voted down a Citicorp The New Jersey Bankers Association has May 21 and wtll take effect on July 1, 1986. sponsored nationwide reciprocal banking requested that the State legislature consider SOUTH DAKOTA bill in April, 1984. legislation for a Central Atlantic region . TENNESSEE expected in January, 1985. The proposal contains two triggers for na Contained in Georgia's Southeastern MASSACHUSETTS tionwide reciprocity: following adoption of region statute and other regional proposals. nationwide reciprocal laws by 13 states, and Permits New England-wide reciprocal The legislature and the Governor have set three years following the adoption of the re up a task force to study regional banking. banking. gional proposals by New Jersey and two MICHIGAN other states in the region. TEXAS Governor Mark White has appointed a A bill which would initially permit region NEW MEXICO al banking with states contiguous to Michi study group to study reciprocal banking for gan passed the House in June and should be Defeated a Citicorp proposal for limited Texas. studied by the Senate in September, 1984; purpose banking in the state in February, Leading bankers are favoring a regional the measure contains a two year trigger for 1984. banking statute for Texas and calling for nationwide interstate banking. Regional banking legislation is expected the establishment of a Southern/South to be considered in 1985. western/Energy Belt region. MINNESOTA Permits the out-of-state acquisition of NEW YORK UTAH failing savings banks. Permits nationwide reciprocal bank ex Permits regionally reciprocal banking The Senate Commerce Committee voted pansion. with Alaska, Arizona, Colorado, Hawaii, 9-6 in March, 1984 against a regionally re NORTH CAROLINA Idaho, Montana, Nevada, New Mexico, ciprocal bill which would have allowed both On July 7, 1984 the state became the Oregon, Washington, and Wyoming. acquisition and de novo organization of Min ninth to enact a regionally reciprocal bank Permits the above states to acquire falling nesota banks; an amendment limiting the ing law; the vote in the Senate was 37 to 1, Utah institutions on a non-reciprocal basis. legislation to Minneapolis/St. Paul was also and 83 to 2 in the House; the law, effective VERMONT rejected. January 1, 1985, covers Alabama, Arizona, Bills to permit acquisition of Vermont Governor Rudy Perpich and Commerce Florida, Georgia, Kentucky, Louisiana, banks on both a reciprocal and non-recipro Commissioner Hatch have announced inten Maryland, Mississippi, North Carolina, cal basis failed in the House in 1984. tions to introduce regional banking legisla South Carolina, Tennessee, Virginia, West VIRGINIA tion which would include a five year trigger, Virginia, and the District of Columbia. a ban on de novo charters, a net new funds At the Governor's request, the Virginia provision, and an antileapfrogging provi NORTH DAKOTA Bankers Association appointed an interstate sion. Contained in several North Central/Mid banking study group; this body voted in MISSISSIPPI western regional banking proposals. July, 1984 to support regionally reciprocal OHIO banking for Virginia. Contained In Georgia regional statute and Permits limited-purpose credit card banks. other Southeastern proposals. H.B. 762, currently in House Committee, W ASHIN'GTON MISSOURI would allow nationwide reciprocal banking, with shareholder protection and deposit Permits the acquisition of falling Wash A Citicorp-sponsored national reciprocity concentration restrictions. ington banks by out-of-state institutions. proposal was defeated in the 1984 session of A substitute bill for H.B. 762 would initial A bill permitting regionally reciprocal the Legislature; other proposals for contigu ly permit regional banking with states con bank acquisitions failed in Committee in ous state and reciprocity, reciprocal acquisi tiguous to Ohio : Flori have the bill before us, and I think we sentatives before sine dine adjourn da, Illinois, Iowa, Nebraska. are within striking distance of getting ment? VI. Limited Purpose Entry <6 states>: a unanimous-consent agreement on, if Mr. BAKER. Mr. President, I do not Delaware, Maryland, Nebraska, Nevada, not a time certain to pass the bill-and know. I would be happy to yield to the South Dakota, Virginia. chairman of the committee. But VII. Failing Institution Statutes <5 states>: we may get that-at least a limitation Illinois, Michigan, Oregon, Utah, Washing of time on all or most of the amend before I do so, however, may I say ab ton. ments that may be offered. solutely with no disrespect for the VIII. States Without Bank Expansion Just so Senators may be up to speed House I have never had much success Statutes/Action <7 states>: Hawaii, Louisi on all of the negotiations that are un over there, and I have just about ana, Mississippi, Montana, North Dakota, derway, they should perhaps also stopped asking. But they operate in Oklahoma, Wyoming. know that we are in the last 3 weeks- their way, and we do in our way. But Mr. GARN. Mr. President, the next 3% weeks-of this session. There is a let me yield to the Senator from Utah, item of business would be to introduce possibility that some Senators will who may have a better insight than the committee amendments en bloc. I insist on the right to offer other my somewhat facetious remark. will do that in a few moments before amendments to this bill that are not Mr. GARN. I thank the distin we proceed to other amendments. related to banking. That has been part guished majority leader. However, I do believe it would be of our conversation so far. There is All I can say to my colleague is 2 helpful at this time, for some further the possibility, for instance, that a years ago, the so-called Garn-St Ger discussions _on the progress of this bill civil rights amendment might be of main bill came up with 2 days left in and where we are going later in the fered to this bill. Any amendment may the session. We passed it, went to con day, to suggest the absence of a be offered to this bill under the cir ference with the House, and it became quorum. cumstances. But that has complicated law. I was told then that there was no The PRESIDING OFFICER. The the question of trying to get a unani possibility of the bill having accommo clerk will call the roll. mous-consent agreement. I am not dation with the House of Representa- September 11, 1984 CONGRESSIONAL RECORD-SENATE 24765 tives. I am told the same thing again. I the two provisions of the House that this bill would be the date that would do not know that until there is a bill. I the whole thrift industry would fail, still stand. can hear all of these rumors from lob and that it would be on my shoulders So if we fail during the interim to byists, and all sorts of things. because I insisted on having additions have a bill, if they invest a few million I can tell you Congressman ST GER to the bill. Well, the thrift industry bucks in nonbank banks, we will even MAIN and I have worked out a large did not collapse, fortunately, and it tually pass those loophole closures and number of difficult problems together was not all dumped on me. But I am a eventually have to go back to 1983. So over the last 4 years. I would expect little bit tired of Congress on these I do not see a great need to rush in him to go to conference, be a tough issues where an entire industry is in a doing just that little bit. We can do bargainer, and there would have to be revolutionary stage always just being a more than that issue. exchanges made. I certainly would not little Dutch boy sticking their fingers expect this bill to pass intact just be in the dike and saying we did what was Mr. EXON. I thank the chairman of cause that is the way the Senate ap necessary to be done. I think it is nec the Banking Committee and I thank proved it, but there are many provi essary to do more than that. I am tired the leader. sions that are similar. of the promises that, if you just do the I would close by saying that on this The South Dakota loophole both must legislation, we will be back in 6 issue I would hope that while there sides agreed should be closed. The months and we will do the additions. may be differences of opinion on some nonbank bank loophole there is no dis Former Chairman PROXMIRE is fa of the things that might be raised, agreement over. Those are two rather miliar with the process. He suffered that we could at least move ahead and major decisions. People seem to con with it a long time before I did, and he let the Senate work its will. It seems to centrate on differences rather than agrees with me that we must pass a me that is the basic appeal that the the similarities and the desire to pro larger bill. I want to make sure the majority leader made. I say to the ma ceed. So I cannot give any guarantees, Senator understands what I have jority leader, that chairman of the but I would not be out here spending always said on this floor many times, Banking Committee, and my distin this time on the floor working this and repeated the last several days. I do guished friend from Wisconsin, the hard on a bill if I did not think it had not insist that the Senate bill, as ranking member, that I will help some possibility. passed out of the Senate Banking wherever I can to move this along. It is no great thrill to say, "Hey, I Committee that is now before us, pass Mr. BAKER. I thank the Senator. got a bill passed in the Senate" that intact or that the House of Represent Mr. President, before we go into never becomes law. I think there is a atives has to swallow every line and morning business for a wrapup, l will reasonable possibility of getting a bill paragraph on it. announce that there will be no more after going through the normal proc There is a big difference between record votes today. ess, as the Senator knows, of the con just accepting a couple of loophole ference with the House and the give closings and some accommodation in and-take situation. between. There is a lot of room in be CLOTURE MOTION Mr. EXON. Will the chairman of the tween because, as the Senator from Banking Committee yield for a further Wisconsin said, 95 percent of this bill Mr. BAKER. Mr. President, I send a question? Is it not true that the chair is not controversial. Earlier today, I cloture motion to the desk. man has just mentioned the two main, went through it, and I again reviewed The PRESIDING OFFICER. The prominent features of the House bill, all of the sections of the bill that are cloture motion having been presented which, No. 1, has to do with closing not controversial. under rule XXII, the Chair directs the the two loopholes that he mentioned? So to throw the baby out with the clerk to read the motion. Is that not in essence what the House bath water, most of those which the The assistant legislative clerk read has passed or is about to pass? House would accept because they are as follows: Mr. GARN. Those are the two major not controversial, my answer to your CLOTURE MOTION provisions in the House bill. Those question is no. I am not going to We, the undersigned Senators, in accord provisions are also contained in this accept a couple of little loophole clo ance with the provisions of Rule XXII of bill. sures. But I am known as a pretty the Standing Rules of the Senate, hereby Mr. EXON. Let me ask the chairman pragmatic legislator who is willing to move to bring to a close debate on S. 2851, a of the Banking Committee if we sit down and trade, as we do in confer bill to authorize depository institution hold should become bogged down on ences, and see what can be worked out. ing companies to engage in certain activities of a financial nature and in certain securi· amendments-! have an amendment There are only four items out of this ties activities, to provide for the safe and that I hope would be noncontroversial 130-some-odd-page bill that are really sound operation of depository institutions, that might be accepted. But basically, controversial. That is the regional and for other purposes. if the additions to the bill over and banking issue, which the Senator from Senators Howard Baker, Mack Matting above what the House has passed New York has been addressing himself ly, John H. Chafee, Dan Quayle, become contentious in this body, then to; there is no dispute over whether Robert Stafford, Slade Gorton, Wil would it be the view of the chairman the South Dakota loophole should be liam Proximre, Chic Hecht, Don Nick of the Banking Committee that the closed. les, Lowell Weicker. Mark Andrews, discretion being the better part of It is a matter of degree with what Arlen Specter, Jake Gam, Warren valor it might be a good idea to back was originally in the bill and what Rudman, Bob Dole, William Cohen, off and just pass in this body the two Senator DoDD amended. The other two and Barry Goldwater. essential ingredients that I understand are municipal revenue bonds and are more or less must legislation, mortgage-backed securities. I am will ROUTINE MORNING BUSINESS which I agree with? Would he consider ing to accept the judgment of the backing off and making the bill Senate on those issues, and then go to Mr. BAKER. Mr. President, I ask coming out of here more in companion conference. But to just accept a couple unanimous consent that there now be with what the House has already of loophole closures, I do not think a period for the transaction of routine acted upon? that would be responsible or neces morning business until 6:15, in which Mr. GARN. No, Senator; I would sary, particularly when I have also, in Senators may speak for not more than not. I made that position very clear these other comments, announced 2 minutes each, except the two lead many times. I have been in this situa that if we fail to reach a bill this year, ers, to whom the time limitation will tion before, and I yielded to that kind that everybody who wants to have a not apply. of threat. In December of 1971, I was nonbank bank be put on notice that The PRESIDING OFFICER. With told if I did not yield and just go with the July 1, 1983, grandfather date in out objection, it is so ordered. 24766 CONGRESSIONAL RECORD-SENATE September 11, 1984 MESSAGES FROM THE 211, 214, and 407 of the bill, of sections documents, which were referred as in PRESIDENT 211 and 214 of the House amendment, dicated: Messages from the President of the and of such portions of sections 301 EC-3762. A communication from the As United States were communicated to and 302 of the bill and of sections 301 sistant Secretary of the Interior of the Immigration and sistant Secretary of the Interior , as indicated: with my colleagues on both sides of Human Resources. By Mr. BOREN (for himself, Mr. the aisle to help correct this loss of EC-3783. A communication from the BAUCUS, Mr. BENTSEN, Mr. BUMPERS, funds by adjusting spending for specif Mr. BURDICK, Mr. EXON, Mr. LEAHY, Comptroller General of the United States, ic Federal programs. As cochairman of transmitting, pursuant to law, a report on Mr. NICKLES, Mr. PRYOR, and Mr. the review of the audit of the United States ZORINSKY): the Northeast-Midwest Senate coali Capitol Historical Society's financial state S. Res. 440. Resolution to express the tion, I have pursued many efforts to ments for the years ended January 31, 1983, sense of the Senate that the President get a better deal for needy States. and 1982; to the Committee on Rules and should immediately notify the Soviet Union While these efforts have helped Adm1n1stration. that additional purchases of U.S. grain, create jobs and improve the economy above the maximum level specified in the of Illinois, and of many other States, REPORTS OF COMMITI'EES Long-Term Grain Agreement, may be made they have not been sufficient to stop by the Soviet Union during the second year the continual flow of funds from these The following reports of committees of the agreement and to seek to modify the States to other States with healthier were submitted: agreement by establishing higher m1n1mum economies. In fiscal 1982, States that By Mr. THURMOND, from the Commit and maximum supply guarantees; to the received less than 90 cents in spending tee on the Judiciary, with amendments: Committee on Foreign Relations. By Mr. ROTH (for himself and Mr. for each tax dollar were short-changed S. 381. A bill to establish a Federal Courts $54 Study Commission and a Federal Oversight TSONGAS): a total of billion by the Federal Council on the Future of the Judiciary S. Con. Res. 139. Concurrent resolution Government. illinois alone paid out . condemning South Africa's arrests and de $12.5 billion more than it received in By Mr. PERCY, from the Committee on tentions of political opponents; to the Com spending. It would require approxi Foreign Relations, without amendment: mittee on Foreign Relations. mately $25 blllion to bring disadvan- 24768 CONGRESSIONAL RECORD-SENATE September 11, 1984 taged States to the 90-cents level. We competitive procurements and non addition, programs which are limited need a comprehensive approach to competitive procurements, the head of by law to certain States, such as the solve this problem. We cannot allow each Federal agency will be required Bureau of Reclamation, the Tennessee vast sums of money to be drained out to award a contract to a firm that will Valley Authority, and the Bonneville of States like Illinois. do the work in a disadvantaged State Power Administration, will not be cov Attached to this statement is a re if it submits a bid that is lower or ered by the bill. search report I have prepared on the equivalent to a bid from a firm that The State Minimum Return Act is problem of these Federal dollar out would do the work elsewhere. This an attempt to develop the comprehen flows. The report analyzes the source means that if a metal cabinet for a sive approach we need to end what of these outflows, highlighting the low Government office or a rubber fuel amounts to a multibillion dollar penal level of defense contracts and, to a line for an Air Force plane can be ty being paid each year by Illinois and lesser extent, grant programs in disad made in Illinois more cheaply, or at many other States. By any measure, vantaged states. Additionally, the the same price, than it can be made in there is every reason that these States report examines the consequences of a State that gets more than its fair should be getting back their fair share these outflows for States. The econo share of spending from the Federal of the Federal budget. I realize that mies of States sending more money to Government, that cabinet or fuel line Washington in taxes than they receive is going to be made in Illinois by work this bill represents the first attempt to in spending have low growth rates. ers and businesses in Illinois. tackle this complex problem, and I will These rates result in part from low Under this bill, contracting agencies welcome any comments or suggestions levels of the types of Federal funds will also have to attempt to increase for improvement by my colleagues and which generate growth-grants and the share of contracts in each disad other interested parties. contracts. I request unanimous con vantaged State by 10 percent in each I urge my colleagues to join me in sent that the text of the research fiscal year, and will report on their this effort to help these disadvantaged report be printed in the REcoRD at the progress annually. All States which States get back a fair share of their conclusion of my remarks. currently receive less than $1 back tax dollars. The bill I am introducing will adjust from the Government in spending for Mr. PROXMIRE. Mr. President, will Federal spending in the categories of each dollar they pay out in taxes will the Senator from Illinois yield? Government contracts and grant pro be eligible for these provisions. Mr. DIXON. Mr. President, I shall grams. Contracts and grants account The procurement provisions will be delighted to yield to my warm ed for $250 billion of the Federal create an incentive for companies to friend, the distinguished senior Sena budget in fiscal1983, and are the chief locate in Illinois and other disadvan tor from Wisconsin. sources of imbalances among States. taged States. In doing so, this bill will Mr. PROXMIRE. May I say to my These spending categories help stimu help restore the business climates in good friend from Illinois that I am de late economic growth, creating jobs these States, which have been disrupt lighted and honored that I am cospon and spurring private investment. ed by the drain of Federal funds and soring this important measure. It is Grants and contracts cause a ripple low levels of funding for grants and about time. I say to the Senator from effect in the economy of a community. contracts. Illinois that he can come to Wisconsin The award of a Government contract States will be eligible to receive addi for any type of parade, if we vote this not only creates jobs in the company tional grants and contracts if they cur bill, and the citizens of Wisconsin in which the work is performed. It also rently receive less than 90 cents in would be glad to carry him on their increases business and creates jobs in spending for each tax dollar. States shoulders throughout the parade local companies supplying goods to the will be eligible to receive additional route. This is a wonderful proposal contractor. contracts if they receive between 90 and about time. I am just unhappy In the area of Federal grants to cents and $1 in spending for each tax that I did not think about it 20 years State and local governments, the State dollar. ago. It is something we should have Minimum Return Act will increase by Let me say again that this bill will been doing all along. Not only is this a 10 percent the share of moneys going not require additional spending in lalapalooza, to use the word of my to disadvantaged States. For example, these categories. I firmly believe that good friend from Illinois, for the tax if Illinois received an average of $100 increasing spending across-the-board is payers of Wisconsin, but I think for million of a $1 billion highway pro not the way to solve this problem. The people throughout the country it is a gram, or 10 percent, it would receive resulting increases in the deficit would good idea. $110 million, or 11 percent, in the first worsen rather than improve the What it means is it will stimulate year after the bill was enacted. That economies of Illinois and other disad competition. If the people and the would mean an additional $10 million vantaged States, and the economy of businesses of illinois realize that they to repair unsafe bridges and to repave the Nation as a whole. can get those contracts if they come highways, and jobs for Illinoisans to What is being suggested here is a after them, they will do it. Unfortu work on those projects. reallocation of Federal moneys among nately, in our State, we get one-half of Since there are usually more the States, rather than the creation of 1 percent of the Federal defense con projects that meet eligibility require new Government spending programs. tracts, although we pay about 2 per ments for grant programs than there In addition, in order not to penalize cent of the taxes and we have about 3 is funding available, this provision will the needy and other citizens who cur or 4 percent of the industry. So we are allow disadvantaged States to receive a rently receive direct Government ben getting, at the very best, one-quarter greater proportion of their eligible efits in all States, the bill will not of what we should get in defense con projects. For example, if the city of affect payments to individuals by the tracts. That is partly because our Rockford, IL, wanted to renovate an Federal Government. Such programs people are not aggressive enough. old, abandoned warehouse in a run as Social Security, food stamps, sup They are not active enough; they do down neighborhood, to attract new plemental security income, Pell grants, not bid enough. But it is also because business and improve the economy of lower income housing assistance, vet there obviously is a tendency to go the community, it would be more erans assistance, black lung disability, back to the same old places, year after likely under this bill to get an urban guaranteed student loan interest subsi year, to the great disadvantage of illi development action grant for this dies, retirement payments for railroad nois and Wisconsin, both of which project than it would otherwise. workers, and Federal workers' com have serious unemployment problems, Disadvantaged States will also re pensation, retirement and disability, both of which have industry that can ceive additional moneys in the area of and employee life and health insur do the job, that have people who are Federal contracts. With respect to ance will not be affected by the bill. In ready and willing to put in a full day's September 11, 1984 CONGRESSIONAL RECORD-SENATE 24769 work for a full day's pay but do not <3> The term "State" means each of the veterans assistance, including pen have the opportunity to do it. several States and the District of Columbia. sions, service connected disability, nonser I am delighted the Senator has in (4) The term "historic share" means the vice connected disability, educational assist average percentage share of Federal ex ance, dependency payments, and pensions troduced this bill and I am pleased and penditures received by any State during the for spouses and surviving dependents; honored to be a cosponsor. most recent three fiscal years. Federal workers' compensation; Mr. DIXON. Mr. President, may I <5> The term "Federal expenditures" Federal retirement and disability; and say how pleased the Senator from Illi means all outlays by the Federal Govern Federal employee life and health in- nois is that the Senator from Wiscon ment as defined in section 3( 1 > of the Con surance. sin is a principal cosponsor. He has for gressional Budget and Impoundment Con many years here established a reputa trol Act of 1974 <2 U.S.C. 622<1)). REALLOCATION AUTHORITY tion as a protector of the public purse (6) The term "Federal tax revenues" SEc. 6. Notwithstanding any other pro means all revenues collected pursuant to vision of law, during any fiscal year the while working always for fairness and head of each Federal agency shall, after equity in this place. This bill is de the Internal Revenue Code of 1954. DESIGNATION OF ELIGIBLE STATES consultation with the Director, make such signed to protect the public purse. It reallocations of expenditures described in spends no additional money; it simply SEc. 4. Any State shall be eligible for a section 5 to eligible States designated under allocates funds into loser States such positive reallocation of Federal expendi section 4 as are necessary to ensure the ob as Wisconsin and Illinois that, for tures described in section 5 and received by jective described in section 2. such State under section 7, if such State, (b) Notwithstanding any other provision many, many decades, have been under for any fiscal ye.ar, has a Federal expendi privileged in favor of other parts of ture to Federal tax ratio which is less than of law and to the extent necessary in the ad the country with respect to the ex ministration of this Act, the head of each 90 percent. Federal agency shall waive any administra penditure of Federal dollars. I am very (b) Any State shall be eligible for a posi tive provision with respect to allocation, al much honored by the fact that a man tive reallocation of Federal expenditures de lotments, reservations, priorities, or plan whom I so richly and warmly admire, scribed in section 5 and received by such State under paragraph <1 > of section 7(a), if ning and application requirements for the expendi before coming to this place, has joined such State, for any fiscal year, has a Federal expenditure to Federal tax ratio which is tures reallocated under this Act. me in this struggle. less than 100 percent but greater than or The head of each Federal agency Mr. PROXMIRE. Mr. President, not equal to 90 percent. having responsibilities under this Act is au only has the Senator from lllinois During each fiscal year, the Director thorized and directed to cooperate with the made a good proposal but he has also after consultation with the Commissioner of Director in the administration of the provi paved the way for what I think will be the Internal Revenue Service and the Direc sions of this Act. a hardhitting confrontation among tor of the Census Bureau, shall determine REALLOCATION MECHANISMS Members of the Senate. the eligibility of any State under this sec SEc. 7. Notwithstanding any other pro People have not always been as gen tion using the most recent fiscal data and vision of law, for purposes of this Act, erous as we would like them to be. But estimated data available concerning Federal during any fiscal year reallocations of ex that is healthy. There not only will be tax revenues and Federal expenditures at penditures required by section 6 shall be ac competition between industries and tributable to such State. The Commissioner complished in the following manner: of the Internal Revenue Service shall deter With respect to procurement con States but among Senators. I think we mine the attribution of Federal tax reve tracts, the head of each Federal agency are going to see a very exciting fight nues to each State after consultation with shall- over this bill when it is debated. I appropriate officials of the National Tax (i) identify qualified firms in eligible hope we see a companion bill intro Foundation. States designated under section 4 and dis duced in the House. DESIGNATION OF REALLOCABLE FEDERAL seminate any information to such firms nec Mr. DIXON. I thank my friend, and EXPENDITURES essary to increase participation by such I ask unanimous consent that at this SEc. 5. All Federal expenditures in any firms in the bidding for such contracts, point there be included in the REcoRD fiscal year shall be subject to reallocation to Water and energy programs which are thirty days after the end of each the bill and a guide to the bill. authorized by law and benefit a region of fiscal year, report to the Director regarding There being no objection, the mate the United States composed of more than 3 progress made during such fiscal year to in rial was ordered to be printed in the States but not all States. crease the share of such contracts for such RECORD, as follows: <2> Compensation and allowances of offi eligible States, including the percentage in s. 2982 cers and employees of the Federal Govern crease achieved under clause and if the goal described in clause is not attained, Be it enacted by the Senate and House of ment. Representatives of the United States of <3> Maintenance of Federal Government the reasons therefor. America in Congress assembled, That this buildings and installations. Within ninety days after the end of each Act may be cited as the "State Minimum <4> Offsetting receipts. fiscal year, the Director shall review, evalu Return Act of 1984". (5) Programs for which the Federal Gov ate, and report to the Congress as to the ernment assumes the total cost and in progress made during such fiscal year to in STATEMENT OF POLICY which a direct payment is made to a recipi crease the share of procurement contracts SEc. 2. It is the purpose of this Act to pro ent other than a governmental unit. Such the preponderance of the value of which vide, within existing budgetary limits, au programs include: has been performed in such eligible States. thority to reallocate the distribution of cer Social Security, including disability, In the case of any competitive pro tain Federal spending to various States in retirement, survivors insurance, unemploy curement contract, the head of the con order to ensure by the end of fiscal year ment compensation, and Medicare, includ tracting Federal agency shall award such 1989 that each State receive in each fiscal ing hospital and supplementary medical in contract to the lowest bid_from a qualified year an amount of Federal expenditures surance; firm that will perform the preponderance of equal to a minimum of 90 percent of the Supplemental Security Income; the value of the work in an eligible State Federal tax burden attributable to such Food Stamps; designated under section 4 if the bid for State for such fiscal year. Black Lung Disability; such contract is lower or equivalent to any DEFINITIONS National Guaranteed Student Loan in- bid from any qualified firm that will per SEC. 3. As used in this Act- terest subsidies; form the preponderance of the value of the ( 1 > The term "Director" means the Direc Pell grants; work in an ineligible State. tor of the Office of Management and lower income housing assistance; In the case of any noncompetitive pro Budget. of title 5, railroad retirement; tract to a qualified firm that will perform United States Code. excess earned income tax credits; the preponderance of the value of the work 24770 CONGRESSIONAL RECORD-SENATE September 11, 1984 In an ellgtble State designated under section As this report shows, this pattern of fund nessee Valley Authority, the Rural Electrifi 4 and that complete such contract at a ing flows has existed for over a generation. cation Administration and a host of other lower or equivalent price as any qualified In the past three years, however, it has federal initiatives made today's booming finn that will perform the preponderance of worsened, due in large part to a shift in "Sunbelt" possible. Yet, some 50 years later, the value of the work In an lnellgtble State. budget priorities which has Increased the the economic tables have turned. Govern For purposes of this paragraph, In the outflows and which has caused Dlinois and ment policy has not responded to those ease of any procurement contract, any finn other disadvantaged states to fall farther changes. Without requesting any new feder shall be qualified if- behind beneficiary states. Increases in the al spending, I am advocating a shift in a (1) such finn has met the elements of re defense budget and corresponding cutbacks policy based on equity. Government spend sponsibility provided for In section 8<7> of and freezes in other spending categories Ing and tax policies should not make a bad the Small Business Act as determined by have caused money to flow out of Dlinois situation worse. They should not aggravate the head of the contracting Federal agency and its neighboring states at a higher economic disparities, brought on in large to be necessary to complete the contract In volume and at a faster rate. This report dis measure by the recession and by structural a timely and satisfactory manner, and cusses the sources and implications of this changes in the economy. In the interest of with respect to any prequallfication re problem, and a proposed solution, "The national and state economic growth and of quirement, such finn has been notified In State Minimum Return Act of 1984." equity, the time has come to reverse this writing of all standards which a prospective INTRODUCI'ION dangerous trend. contractor must satisfy In order to become Since the Second World War, the geo qualified, and upon request, is provided a graphic and structural bases of the Ameri prompt opportunity to demonstrate the CHAPTER !-SOURCES OF THE BALANCE OF can economy have undergone profound and PAYMENTS PROBLEM ability of such finn to meet such specified much-chronicled change. A shift in empha standards. sis from heavy manufacturing to service and The annual outflow of federal dollars <2> With respect to all other expendi high-technology industries, and the migra from Dlinois is the product of several fac tures described in section 5, any eligible tion of population, businesses, and capital tors, some of which can be traced back 50 State designated under section 4 shall re from the large cities of the Midwest and years. In order to correct this inequity ceive 110 percent of such State's historic Northeast to the expanding cities of the which burdens the state, it is essential to ex share with respect to such expenditures. South and West are only two, albeit the amine these factors closely. We must look In the case of projects funded by Fed most sweeping, of these developments. The first at taxes and expenditures. eral expenditures authorized and appropri short-term results of these shifts for many FEDERAL TAX PAYMENTS ated on an individual project basis, subpara states of the Northeast and Midwest have As an historically wealthy and populous graph shall be applied to the greatest been higher unemployment rates, increasing state, Dlinois traditionally has paid large extent practical. levels of poverty, and slower rates of eco amounts of federal taxes at high rates. No reallocation shall be made under nomic growth. Since 1952, Dlinois has been ranked among this section with respect to expenditures for Patterns of federal spending in recent any program to any State in any fiscal year the top states both in total federal taxes years have closely mirrored these regional paid and in per capita tax payments. <1 > In which results in a reduction of 10 percent or economic changes. Prospering states in the 1982, Dlinois was ranked 4th in total tax more of the amount of such expenditures to South and West have consistently received payments and 7th in per capita tax pay such State. higher proportions of federal spending than ments. These ranklngs reflect a slight slip No reallocation shall be made under those in the Northeast and Midwest. Dlinois page in recent years, due to a decline in the the provisions of this Act which will result stands as the most glaring example of this annual growth rate of the Illinois economy in any Federal expenditure to Federal tax inequity. In 1982, Dlinois ranked 51st among as compared to other large states in the ratio of any State being reduced below 90 all states (including the District of Colum South and West. percent. bia), receiving 66 cents in spending for each At first glance, Illinois' high tax rates AMENDMENTS tax dollar it sent to the federal government. appear to be a decisive factor in the state's SEC. 8. No provision of law shall explicitly In that same year, Michigan received 76 negative balance of payments with the fed or implicitly amend the provisions of this cents for each tax dollar, Indiana received eral government. Indeed, Professor Janet Act unless such provision specifically refers 77 cents, and Wisconsin received 78 cents Rothenberg Pack notes that revenues, or to this Act. . .> Given the economic hardship en states. Pack cites the narrowing of gaps over take effect for fiscal years beginning after countered by these states during the reces time between the favorable ratios of certain the date ·of the enactment of this Act. sion of 1982, these numbers suggest a dis states and the dismal ratios of other states turbing paradox: Federal spending flows as evidence of this argument. Between 1952 ILLINOIS AND THE DRAIN OF FEDERAL FuNDs least into those states which need it most. and 1976, for example, New Mexico's tax/ Because federal outlays currently com expenditure ratio declined from $2.99 to prise nearly one-quarter of the Gross Na EX.ECUTIVE SUlDlARY $1.47, while New Hampshire's ratio in tional Product, their distribution has wide creased from .64 to .90. <2> According to In 1981 and 1982, Dlinois ranked dead last ranging and substantial effects. Federal Pack, the convergence of these high and low in terms of the dollars it got back from the spending helps create jobs, alleviate pover ratios in states can be explained largely by federal government for its tax payments. In ty, and ease fiscal burdens on state and local the narrowing of income differentials 1983, Dlinois received 75 cents in spending governments. In Dlinois, comparatively low among states and regions and the resultant for each tax dollar it sent to Washington. In levels of federal spending threaten to de narrowing of tax burdens among these the same year, twelve states received more crease the quality of life for its citizens and states. (3) In other words, states which had than $1.20 in federal spending for each one to hurt the business climate, discouraging relatively low incomes and enjoyed high of their tax dollars. This enequity is not new investment and the formation of new growth rates between 1952 and 1976 wit unique to Dlinois, but applies also to many businesses within the state. Illinois' low per nessed declines in their ratios, due to their other states, principally in the Northeast centage of federal contracts has hindered increased tax burdens, and vice-versa. and Midwest, which send large amounts of employment and profits, and thus has Dlinois, however, does not fit this hypoth tax dollars annually to Washington, and get slowed the state's recovery from the recent esis. Despite the state's relatively high back an abysmally low level of spending in recession. Freezes and cutbacks in social income and low growth rate, its tax/expend such categories as defense, federal installa service programs have exacted a particular iture ratio in 1976 <.70> was almost identical tions, and many grant projects. The result is ly painful toll on the poor of Dlinois. to its ratio in 1952 <.69). Thus, Dlinois' high a massive annual drain of money out of After careful consideration of these fac tax burden and low growth and higher un these states. Many of these states are tors, I have concluded that the federal gov employment rates do not appear to have in among those areas which suffered most ernment must adjust its spending patterns fluenced strongly its tax/expenditure ratio. under the recent recession and which con to prevent such obvious and damaging dis For this reason, it is necessary to examine tinue to be plagued by higher rates of un parities. In the 1930s, President Franklin D. spending patterns. employment. They can ill afford such an Roosevelt launched a massive federal effort outflow of funds. The end product of this to address the economic problems that FEDERAL EXPENDITURES outflow Is an infusion of federal money into plagued the South, noting that the national By virtue of its size, as in the case of tax other states, principally in the South and economy, as a whole, could never achieve its payments, Dllnois has always ranked near West, whose economies have been thriving full potential as long as one region of the the top in total federal expenditures. Unlike in recent years. country was vastly underutillzed. The Ten- tax payments, however, per capita spending September 11, 1984 CONGRESSIONAL RECORD-SENATE 24771 in Dllnols has consistently rated among the benefits which exceed the value of the con A subtler implication of mtnois' negative lowest states. In 1982, Dllnols ranked 46th tracts. <4> Collectively labeled the "multipli balance of payments lies in the strain on among all states in federal per capita ex er" or "ripple" effect, these benefits are es the fiscal capacity of the state and local gov penditures, with an average of $1,950-more pecially helpful to communities during eco ernments which results from smaller infu than $600 below the national average of nomic downturns. Finally, since many major sions of federal spending for grants-in-aid. $2,591 . For at least three of the defense procurements are funded on a Between 1981 and 1983, federal spending for preceding five years, Dllnols had been multi-year basis, they produce a long-term grants-in-aid declined by 2.2 percent, from ranked 40th or below. According to the effect on state and local economies. Dllnois' $94.8 billion to $92.7 billion. Grants to Dli Census Bureau, Dllnols' Jump in 1983 to low level of these expenditures has placed nois, moreover, declined by 9.1 percent, 34th can largely be explained by new cate the state at a disadvantage from which it from $4.6 billion to $4.2 billion. The strains gories of spending added to the data base must emerge immediately to avoid worsen caused by these declines forced state and that Is used to calculate the rank.ings. ing problems in future years. local governments to curtail services and At least as important as Dllnols' low rank raise taxes, which hurt the business climate in total per capita expenditures are the CHAPTER 2-biPLICATIONS OP THE BALANCE OP as well as quality of life for citizens. types of federal spending which enter the PAYMENTS PROBLEK state. Spending in the form of grants and StTIDlARY procurement, called "hard" spending by an Several serious implications arise from an In sum. what emerges from an examina alysts, produces a ripple effect in communi examination of Dllnois' negative balance of tion of Dllnois' negative balance of pay ties, by stimulating private investment and payments with the federal government. ments is a vast inequity-and a powerfully creating Jobs. As a result, the benefits which Most important among these is the influ ironic inequity at that--which has caused flow from this type of spending often out ence that this disparity can exert on the damaging effects already and may potential weigh the dollar value of the spending. In economic growth rate of the state. This ly cause more of them if something is not Dllnols, however, direct payments to individ impact is most clearly seen in the correla done. uals, such as Social Security and Food tions between growth rates and tax/expend Recent years have witnessed a pattern in Stamps, comprise a larger share of total iture ratios of states. Pack found that be which the federal government collects large spending than they do in other states. In tween 1950 and 1975, among states which tax payments from high-income, low-growth 1982, more than 62 percent of federal spend averaged ratios of $1.25 and above, 13 of 16 states such as mtnois, and returns a com ing in Dllnois consisted of direct payments had growth rates above the national aver paratively small amount of spending in ex ; only three states had higher age. Among such states as Dlinois, which change. Conversely, the government dis shares. Similarly, Dllnois has traditionally averaged ratios below .90, only one of 12 had penses money in greater proportion among received more federal money in the form of above-average growth rates. (5) More re high-growth states in the South and West, grants-in-aid than many other states. Such cently, between 1979 and 1982, per capita while exacting a comparatively small price grants cover costs of programs ranging from personal income in illinois increased at a in taxes. The federal government thus per Medicaid to mass transit. By 1983, however, rate of 23.4 percent, well below the national petuates the widening economic disparities Dllnois' share of grants had fallen off, as average of 28.3 percent. During these years, between regions and states through its tax the state ranked 34th, receiving $365 per Dllnois' tax/expenditure ratio ranged from and spending policies. capita, slightly below the national average .73 to .66. During the same three-year of $390 . period, per capita personal income in Flori CONCLUSION-A SOLUTION TO THE BALANCE OP It Is in the area of federal procurement da grew at a rate of 33.8 percent, well above PAYKENTS PROBLEM that Dllnols has suffered the most. As is the the national average. Florida enJoyed tax/ To respond to the inequities faced by Dli case with many other Midwestern states, D expenditure rations ranging between $1.11 nois and many other states, it is essential to linois has unfailingly ranked far below and $1.15 during this period.(6) Although readjust federal spending patterns which other states in awards of civilian and de economic growth rates in states are not de are a chief cause of this problem. fense contracts. Only eight percent of Dll termined exclusively by federal balances of The bill I am introducing will do this in nois' federal spending came in the form of payments, the correlation between the two the following manner: to help rectify dis contracts in 1983, as compared to more than is obvious. parities in the negative balances of pay 21 percent for the nation as a whole. Dli The correlation between growth rates and ments of many states and to improve the nois' low level of military contracts, which federal fund flows can be attributed in large economic growth rates of these states, this comprised almost 80 percent of all federal part to the types of spending received in legislation will concentrate on stimulative procurement in 1983, is particularly glaring. states. As noted earlier, certain types of spending categories, such as grants and fed Dllnols received $129 in per capita defense spending, such as transportation, public eral contracts. Spending in these categories procurement in 1983, less than one-quarter works, and defense contracts are more eco will be reallocated among states, so that the of the national average of $535, and less nomically stimulative than direct payments deficit will not increase. To avoid cutting es than one-tenth of the per capita amounts to individuals, since they create employ sential social services for the needy in all received by Connecticut and Virginia. What ment and often induce private investment, states, the bill will not alter formulas for is even more disturbing is that defense rather than Just increase consumption distributing direct payments to individuals, spending has declined as a share of Dllnois rates.<7> Illinois' low growth rate in recent such as Social Security. The bill will, howev federal spending in the past decade. In 1971, years can thus be explained in part by the er, adjust federal shares of social service military outlays represented 17 percent of decline in its share of stimulative spending grant programs such as Medicaid, to ease total federal spending in Dllnois. By 1983, categories. the burden on state and local governments this share had shrunk to less than 12 per A look at Dllnois' federal spending by whose budgets are currently strained by cent. agency illustrates this pattern. Political sci their states' negative balances of payments. Dllnois' low level of defense spending, par entist Thomas Anton observes that between States whose tax/expenditure ratios are ticularly in the category of procurement, is 1971 and 1980, the percentage of Dllnois' below 90 cents will be eligible for all of extremely damaging for three reasons. federal spending accounted for by defense these provisions, and states whose tax/ex First, defense spending has increased sig expenditures declined from 8.5 percent to penditure ratios are between 90 cents and $1 nificantly as a percentage of the federal 4.9 percent, and the share of spending ac will be eligible for provisions regarding pro budget under the present Administration. counted for by the Department of Housing curement. As a result, Dllnois has lost ground to other and Urban Development dipped from 10.8 The results, I hope, will be twofold. The states. This is evidenced by the state's tax/ percent to 5.2 percent.<8> Because these federal government will become more effec expenditure ratio ranking declining from types of spending consist in large part of tive in stimulating investment and jobs in 47th to 51st between 1980 and 1982. Second, public works construction projects and con the states where they are needed most, and many analysts have noted that defense con tracts, which are economically stimulative, a it will ease fiscal burdens on citizens and tracts provide an important stimulus to decline in their share of illinois' federal state and local governments in areas victim local economies, creating jobs, spurring pri spending may also have influenced the ized by inequities in the federal balance of vate investment, and thus inducing indirect state's slower-than-average growth rate. payments. 24772 CONGRESSIONAL RECORD-SENATE September 11, 1984 TABLE I.-DISTRIBUTION OF FEDERAL EXPENDITURES BY CATEGORY: UNITED STATES 1 AND IlliNOIS, ASCAL YEARS 1981-83 [Dollars in millions]
1981 1982 1983
United Illinois Pel United Pel United States cen!2 States Illinois cen!2 States llinais
Tolal~ : 3 Dollars...... $545,469 $21,391 ...... $584,782 $22,353 ...... $672,647 $28,591 ...... Pen:ent...... 100 100 ...... 100 100 ...... 100 100 ..... - .... . Grants: Dollars ...... 93,296 4,610 ...... 86,581 4,103 ...... 89,756 4,191 ...... Percent...... 17.10 21.56 + 4.46 14.81 18.36 + 3.55 13.34 14.66 +1.31 Salaries and wages: Dollars...... - .. 73,652 1,928 ...... 77,494 2,068 ...... 101,469 3,317 ...... Pen:ent...... 13.50 9.01 - 4.49 13.25 9.25 -4.00 15.09 11.61 -3.48 Direct~~~ ...... 257,Jl7 12,522 ...... 283,140 13,919 ...... 322,853 18,009 ...... Percent...... 47.10 58.54 + 11.44 48.42 62.27 + 13.85 48.00 62.99 + 14.99 Procurement: Dollars ...... 116,003 1,995 ...... 132,157 2,053 ...... 142,079 2,221 ...... Percent...... 21.27 9.33 -11.94 22.60 9.18 -13.42 21.12 7.77 -13.35 Other~...... 5,398 337 ...... 5,410 211 ...... 16,486 852 ...... Percent...... 99 1.58 +.59 .92 .94 + .02 2.45 2.98 + .53
1 Only includes monies cistriluted to 50 States and District of Qllumbia. Does not include moneys distributed to U.S. territories. 2 Percent difference. 3 Totals may not add due to rounling. Soun:e: U.S. BUIUU of the Census. "Federal Expenditures by State for FISCal Years 1981, 1982, 1983." (Prepared pursuant to The Consolidated Federal Funds Report Act of 1982-Public Law 97- 326.)
TABLE 2.-ESTIMATED FEDERAL TAX PAYMENTS AND TABLE 4.-PER C'.APITA FEDERAL EXPENDITURES BY rATE- TABLE 5.-ESTIMATED FEDERAL TAX PAYMENTS AND FED EXPENDITURES IN ILLINOIS, 1 FISCAL YEARS 1976-82 GORY AND RAt ..: UNITED STATES AND IlliNOIS, FISCAL ERAL EXPENDITURES BY STATE, FISCAL YEAR 1982- [Dollars in miHions] YEARS 1982 AND 1983-Continued Continued [Amount in millions of dollars] Expenditures Tax payments FISCal year 1982 Fiscal year 1983 Outflow Tax payment 1 Expenditures 2 Pel- Pel- dollars United Illinois United Illinois llol1ai'S cent Dollars cent States Dollars Rank States Dollars Rank Percent Percent Amount of total Amount of total 1976 ...... $15,290 4.32 $18,005 6.17 - $2,715 1977 ...... 17,337 4.45 21 ,537 6.15 - 4,200 Salaries and 1978 ...... 19,276 4.52 23,859 6.05 - 4,583 wages ...... 335 180 40 432 289 37 West: 1979 ...... 20,785 4.49 28.132 6.16 - 7,347 Alaska ...... 1,723 .29 1,868 .32 1980 ...... 23,033 4.42 30,337 5.98 - 7,304 Dir~\.=t . 1,228 1,214 22 I 1,371 I 1,568 6 Arizona ...... 6,621 1.10 7,465 1.28 1981 ...... 21 ,391 3.92 34,426 5.88 -13,035 Procurement...... 626 179 42 669 193 42 California...... 71 ,286 11.85 75,014 12.83 1982 ...... 22,353 3.82 34,874 5.80 - 12,521 Other ...... 23 18 29 70 74 16 QliO!ado ...... 8,249 1.37 7,613 1.30 Hawaii ...... 2,630 .44 3,433 .59
1 Idaho ...... 1.981 .33 2,102 .36 1 Since columns fO! soending and taxes are estimates which do not include Includes Federal employee life and health insurance programs, in which 6,458 1.07 6,334 1.08 spending categories thai could not be allocated by states, these outflow Illinois received $228 per capita, ranking first among all States, excluding the ~~ic::::::: ::::::::::::::::::: ~::::::::: 11 ,865 1.97 15,955 2.73 numbers are necessarily rough estimates and do not appear in tables prepared District of Qllumbia. Montana ...... 1,906 .32 1.782 .30 by the Congressional ResearCh Service. Additionally, the data base was chani«< Source: U.S. Bureau of the Census. "Federal Expenditures by State for Fiscal Nebraska ...... 3,922 .65 3,324 .57 pursuant to The Consolidated Federal Funds Report Act of 1982, so that data Years 1982 and 1983." Nevada ...... 2,591 .43 2,215 .38 for the years 1976 through 1982 may not be added to fO!m a total multi-year New Mexico ...... 2,716 .46 5,142 .88 outflow. North Dakota ...... 1,684 .28 1,460 .25 Source: Ulian Rymarowicz. "Estimated Federal Tax Payments of Individual TABLE 5.-ESTIMATED FEDERAL TAX PAYMENTS AND 6,878 1.14 5,510 .94 States Corooared to Estimated Federal Outlays in the States. FISCal Years ~Toakaia ·::::::::::::::=::::::::::::::: 1,440 .24 1,601 .27 1976- 82." Washington, OC. Congressional Research Service. Table 1. FEDERAL EXPENDITURES BY STATE, FISCAL YEAR 1982 Utah ...... 3,009 .50 3,710 .64 Washington ...... 12,569 2.09 13,010 2.22 [Amount in mUiions of dollars] Wyoming ...... 1,542 .26 1,048 .18 TABLE 3.-FEDERAL TAX/EXPENDITURE RATIOS AND RANK 1 2 Tax payment Expenditures 1 FOR ILLINOIS, ASCAL YEARS 1977-82 t~n~ ~\ec,lheinConcl~ R:.a r~ -~ J~7 usi:g di~~ilu~ Percent Percent $601.605 billion of actual fiscal year 1982 Federal tax revenues. See also Tax Amount Amount of total Ratio of total Foundation Inc., Monthly Features for March, 1983, page 2. (cents) Rank 2 Computations by CRS from table I of the U.S. Bureau of the Census, New England: Federal Expenditures by State for FISCal Year 1982 (prepared pursuant to the Connecticut ...... 10,783 1.79 11,967 2.05 Consorldated Federal Funds Report Act of 1982, Pulilic Law 97-3261 . Total 1977...... 0.72 47 Maine ...... 2,224 .37 3.100 .53 varies frO!O published amounts by $18.794 billion, of which $12.85 IXIIion 1978 ...... - ...... -...... 75 45 Massachusetts ...... 15,819 2.62 17,313 2.96 was not distributed by States and $5.943 biOion was distributed to U.S. 1979...... 73 46 .40 territO!ies. Note also that the total fund distribution by State accounts for 1980...... 74 47 Mew Hampshire ...... 2,387 .40 2,368 80.29 percent of fotal budget outlays ($728.375 biHion) fO! fiscal year 1982. 1981 ....._____ ...... 67 51 Rhode Island ...... 2,438 .41 2,538 .43 Excluded from the census compilation are interest payments on the Federal Vermont...... 1,092 .18 1.155 .20 debt, unemployment compensation payments by States, and other 1982 ...... - .. - ...... -...... 66 51 Mid-Atlantic: disbursed Delaware ...... 1,751 .29 1,491 .26 expenditureS for which State-by-State allocations were not available. (See Note: Ratio-Federal funds distributed for each dollar of Fede!al taxes paid. Maryland ...... 12.109 2.01 15,065 2.58 introduction in the census report for a detailed discussion.) Rank-f« ratios of Federal dollars distriluted per ft!deral taxes paid, for all of New Jersey ...... 23,583 3.92 16,619 2.84 Source: Replicated frO!O uroo Rymarowicz, fiscal 1982. 50 States and District of Columbia. Rankings range from I to 51. Rankings New York ...... 49,481 8.22 43,835 7.50 and ratios based on six.Qgit ratio computations from tax and expenditure data, Pennsylvania ...... 31,136 5.18 28,481 4.87 with the ~ that Tor the United States, $1 in expenditure equals $1 in Midwest: TABLE 6.-FEDERAL TAX/EXPENDITURE RATIOS BY STATE tax payments. Illinois ...... 34,874 5.80 22,353 3.82 FISCAL YEAR 1982 Source: Same as table 2, except these are taken from Rymarowicz, table 2 Indiana ...... 13,590 2.26 10,111 1.73 for fiscal years 1977-$2. Iowa ...... 7,493 1.25 5,196 .89 24,500 4.07 18,016 3.08 Spencing/ =~.=a ~:::::::::::: : :::::::::::::::::::::: 10,920 1.82 8,560 1.46 taxes Rank TABLE 4.-PER CAPITA FEDERAL EXPENDITURES BY rATE Ohio ...... 28,249 4.10 23,282 3.98 ratio WISCOIISin ...... - ...... 11,642 1.94 8,897 1.52 GORY AND RANK: UNITED STATES AND IWNOIS, ASCAL South: Alabama ...... 7,686 1.28 9,668 1.65 New England: YEARS 1982 AND 1983 Arbnsas ...... 4.163 .69 5,100 .87 Connecticut ...... _...... 1.15 16 florida ._...... 25,583 4.25 28,460 4.87 Maine ...... -...... 1.43 5 12,766 FISCal year 1982 Fiscal year 1983 Georgia ...... 11 ,868 1.97 2.18 Massachusetts ...... 1.13 17 7,293 1.21 7,747 1.33 New H~ire ...... ___ ...... _.. 1.10 Z9 !liDs lllinJis r:= ~: : ~ : ~:: : ::::::::::~~::::::=:::: 10,200 1.70 9,575 1.64 Rhode Island ...... -...... 1.05 26 United United Mississippi ...... 4,273 .71 6,562 1.12 Vermont ...... -...... 1.11 19 Slates Slates North CmJiina ...... 12,298 2.04 11,527 1.97 llalars Rank llalars Rank adahoma ...... 7,752 1.29 6,952 1.19 Average ...... _ ...... _._.. 1.14 ...... ,.. __ SoutiiCarolilla ...... 6,006 1.00 7,371 1.26 Mid-Atlantic: TGIJI Tennessee ...... 9,775 1.62 11,359 1.94 Delaware ...... 86 40 apeldtares ..... $2,591 $1,950 46 $2,932 $2,489 34 lew ...... 40,948 6.81 32,114 5.49 Maryland ...... __, ,...... 1.28 9 IDit 13,798 2.29 21,865 3.74 New Jersey ...... ---...... - ...... 72 48 3,977 .66 3,998 .68 New YO!ll ...... - ... --...... _ ...... 91 36 upllldibl'es ·- 379 358 33 3liO 365 J.4 mq;n;:::=-.::=:::::::::::::::::::: September 11, 1984 CONGRESSIONAL RECORD-SENATE 24773 TABlE 6.-FEDERAL TAX/EXPENDITURE RATIOS BY STATE TABLE 7.-PER CAPITA FEDERAL EXPENDITURES BY STATE: TABlE 8.-PER CAPITA FEDERAL EXPENDITURES BY STATE: ASCAL YEAR 1982-Continued TOTAL EXPENDITURES AND PROCUREMENT, ASCAL YEAR TOTAL EXPENDITURES AND PROCUREMENT, ASCAl YEAR 1982-Continued 1983-Continued
~g/ Rank ratio Total CMf.an and Total expencillres defense expencillres procurement P!nnsylvania ...... -...... 94 33 Average ...... 92 ···········-·-·· Midwest: := ::::::::::::: : ::::::::::::::::::::::~:=~:::::::::::::::::::::::: :~ ~~ Gugia ...... _._ ...... 2,290 28 335 33 Missouri..... ·-···---····--·······-·--······· 3,811 6 1,269 4 2,115 40 185 41 Montana ······-····-···-···-·-·--············ 2,698 26 169 45 Iowa...... 71 49 ~M1:! :_:_:: __: :_:::_:_:_:::_:_·_.:_:_:_:_:_~_-_:_._·:_:_:_~_-_·_:_:_:_~_·:::: __ ::_~ _·_ 2,222 33 634 14 Nebraska ... ·-·········---··---·-···-· 2,711 25 194 41 =a·:::::: ::::-~:::: : :::::: ::: :::: ::~~ ::: :::::::: :: :::::: : ~ ll _,.,...... 2,593 17 580 17 Nevada ·-··-·-·····--·-··--·······-·-· 2,916 16 767 10 Ohio ...... 85 41 North Carolina ...... 1,936 47 168 43 New Mexico ...... ______3,826 5 1.381 3 WISCOnSin...... 78 45 Oklahoma ...... 2,243 31 212 38 North Dakota ...... 3,129 11 287 37 ----- South Carolina •...... ·-·····--··-··--··-·· 2,327 27 370 31 2,335 44 144 48 Average ...... 76 ...... Tennessee ...... ·-····-·--··-·············· 2,463 23 584 16 ~ToakOia·::::.=:=:::::::::::::::::: 2,751 22 166 46 2,175 37 536 20 Utah ····-···-----·--··················- 2,540 33 537 19 South:Alabama ...... -...... 1.29 180 ~West~Vi··;=;~: :=~----·-.·::.· _: __··_: __ : __·· .··_:_~_-_:_::._ ·_:_:_~.·.~. -~~-·-. 4,027 2 1,203 4 3,555 8 1,206 7 Arbnsas ...... 1.26 "<>"'oa.... -- .... 2,048 44 86 50 =n:;~-==~=-~~~=~=.:_~:= 2,315 41 136 49 Florida...... 1.15 15 West: Gugia ...... 1.11 20 Alaska ...... ·-····· 4,533 1 1,089 6 United States····-······------·-·········-· 2,932 ·········-····· 669 ···-··--· Kentucky 1.09 23 Arizona ···-·--·-··---·-----···-····-·· 2,672 13 649 13 3,100 8 1,126 5 Year~ ~ .S. Bweau of the Census, "federal Upencitures by State for fiscal = ::::::::::=::::::::::::::::::::=::::::::::::::::::::::=: 1 .96 31 ~r~omia ...... 2,568 18 616 IS North ~rorlll3 ...... : ~ ~ =:..::::::::::::::::::::::::::::::::::::::::::: 3,499 6 356 32 Note.-Ranks do not indllle District of Columbia, but U.S. total does Oklahoma ...... 92 35 Idaho _ ...... - ...... 2.192 36 410 27 include District of Columbia. Figures for District of Columbia are: Per capita 2,658 15 663 12 total expenditures-$18,473; and pe1 capita procurement-$2,148. ~~.:::::::::::::::::::::::::::::::~~:::::::~.:::::::::: H~ g ~.::==~~:::::~:::::::::::::::::: : :::::: 3,229 7 1,257 3 Texas .81 43 Montana ..... ---·-···-·-···--·-·-·--· 2,247 29 121 49 2,108 41 152 46 TABlE 9.-TAX/EXPENDITURE RATIOS OF DISADVANTAGED :~~~~ : : ::::=:::::~~=::::::::::~~=::: :: ::=:=~~:::::: t~ 2~ ~.::: : :::::::=~~:=-~=:=:~~:::::: 2,621 16 664 11 ----- New Mexico ---·--······-········-····-· 3,872 3 1,501 2 STATES EUGIBlE UNDER All SECTIONS OF STATE MINI Average ...... -...... 1.09 ...... North Dakota ...... 2,219 35 155 45 2,079 43 149 47 MUM RETURN ACT, FISCAL YEAR 1983 West: Alaska...... 1.10 21 ~~~:::_--:::::: : ::=:::::::: : =~~ 2,335 26 160 44 Arizona ...... 1.16 14 Utah ...... ---··.. ···-·--······-·-·· 2,444 24 542 19 Ratio Rank 1 California...... 1.08 24 Washington ···-·········-··-····--··········· 3,085 9 946 9 2,129 39 210 39 ft!':. ::::::::::: :: :: :::::::: :: : ::::::::::::::~: ::::::::::: :::::::: d~ 3~ Wyoming .. -·-··---·---···--·=-··-·· Mit-Atlantic: 2,591 ······-·-···· Idaho ...... -...... 1.09 22 United States.·--·············-···--····-·.. ··· 626 ·······-···· Delaware .... ·--·-·---·--··-··--·-·-- $0.80 46 2 New Jersey --·-·······-·-·-··------.68 51 =if::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: l : ~~ ~ Source: U.S. Bureau of the Census, "Federal Upencitures by State for FLu Midwest: Montana...... 94 34 Year 1982." lmnois ...... ·-······· ·······················-··-······--··-·- ··· .75 48 Nebraska ...... -····-·---········· ····· .88 39 Note. -Ranks do not include District of Columbia, but U.S. total does lndiana ...... ·-·······----········-·······--······- .83 43 Nevada...... 88 38 lowa ...... ·-···- ·-··--·---·--.. ------··· .86 41 New Mexico...... 1.91 2 ~~~r.ffl: r:= ~~~9~ Per C3!Xta .79 47 North Dakota ...... 89 37 =~=a.::::::::::::::::::::::==::::::=:= .86 42 Ohio ...... ·-····-······-··-·······-····-··--.. ----- ·-- .87 39 ~oakiiia :::::::::::::::::::::::::::::::::::::::::::::::::::::::::: 1 :~~ 1~ TABLE 8.-PER CAPITA FEDERAL EXPENDITURES BY STATE: WISCOilSin ·······-·············-····-·······-·······-·-·-·····-· .82 45 utah...... 1.26 12 South: Washington ...... ·-······-······· ···············-·-········-··-··· 1.06 25 TOTAL EXPENDITURES AND PROCUREMENT, FISCAL YEAR louisiana...... ·-·······-·-----·-·······--·--·-·· .86 40 Wyoming...... 69 50 Oklahoma·-·····························---·····-.. --·· .82 44 1983 Texas ...... 75 49 Average ···············-··············-····-························ 1.09 ··-·············· West: Northeast ········································-·······-··············-······· .97 ···········-···· Total llvilian and Colorado ...... _ ...... 89 38 Midwest.. ...-········· ····--·················-··························-···· .76 ·········-···· expencitures defense Wyoming ...... -...... 70 50 Northeast and Midwest...... 87 ···--···-·-··· procurement South ...... 1.09 ·-··-··········· 1 West ...... 1.09 ...... Includes District of Columbia, which ranked first. Rank South and West ...... 1.09 ··············-·· ~ ~ Rank Note.- These ratios differ from those in table 6 for fiscal year 1982 District of Columbia ...... 4.02 1 mg because of the addition of two spending categories (expenditures for Postal Service procurement and salaries and expenditures for Federal employee Hie and U.S. average ...... 1.00 ...... New England: health insurance) to the data base for "Federal Expenditures by State for Connecticut...... $3.750 7 $1 ,755 1 FIScal Year 1983," that increased signifantly the amount of Federal spending Source: Rymarowicz, fascal 1982. Maine ...... 2,679 27 378 32 allocated to IHinois, Michigan, Texas, and other large states. Massachusetts.-...... 3,484 9 1,112 8 Source: U.S. Bureau of the Census, "Federal Upenditures by State for FIScal New Hampshire ...... 2,784 20 601 14 Yea! 1983," and Tax Foundation, Inc. "Monthly Tax Features." (Washington, TABlE 7.-PER CAPITA FEDERAL EXPENDITURES BY STATE: Rhode Island ····-···················-············· 2,946 14 425 24 DC, April1984) . Vermont...... -...... 2,551 31 374 33 TOTAL EXPENDITURES AND PROCUREMENT, FISCAl YEAR MiG-Atlantic: 1982 Delaware ...... 2,572 30 381 31 TABlE 9A.-TAX/EXPENDITURE RATIOS OF ADVANTAGED Maryland······-·························-··········· 4,211 3 1,246 5 New .ler3ey ...... 2,481 35 416 25 STATES 2,906 17 549 17 Total Civilian and New Y0111 .. ·-·····-···-··························- [In millions of dollars] expenditures defense Pennsylvania ...... 2.786 19 345 35 procurement Midwest: 11finois ...... ---······-·····-····-············-· 2,489 34 193 42 Ratio Rank 2,199 49 398 28 ~ Indiana -············-·············-····-············ mg Iowa··-·····-·······-······-·-·········-··········· 2,250 46 179 43 Michigan...... 2,203 48 214 38 New England: Minnesota ...... 2,437 36 428 23 Maine...... $1 .22 12 New Englanl: Ohio---······························"················ 2,435 37 415 26 Massachusetts ························-·················-·-··-···· 1.09 24 Connecticut ...... ·-·······--···-·····-··-· $3,819 4 $2,129 1 Wisconsin ...... 2,220 47 208 39 Rhode Island ...... ---················----·· 1.05 27 Maine -························-············-········· 2,736 12 715 10 South: Vermont ·········-···················-············-······-···· .. ··-· 1.09 22 Massachusetts ...... 2,999 10 975 7 Alabama ...... 2,717 24 346 34 Mid-Atlantic: 2,530 19 574 18 Arbnsas ·····-·-··································· 2,609 28 309 36 Maryland ...... -·············-··········· .. ·-·--··.. ··-···· 1.29 ~-~ :: :: :: ::::~~~ ::: : : ::::::::::::: : :: 2,663 14 411 25 Florida ...... 3,047 12 542 18 South: Yennant:::e ...... 2.239 32 412 26 Georgia ...... 2,580 29 457 22 Alabama...... 1.29 9 MiJ.AIIantic: Kentucky ·-·-····-··-···-·········-··········-·· 2,376 40 207 40 Arkansas ...... ·-·······-···-···-·············--·-·· 1.33 7 Delaware ·-··--·-·-·····--·······-········- 2,493 20 516 21 2,326 45 412 27 Florida ...... -...... - ... ·····--···- 1.10 18 754 11 Malyland ···-··················-·······--·········· 3,534 5 959 8 = :::::~-::::::::::::::::::::~:::::::::::::: 2,978 13 21 New .IelSey ...... - ..•• 2,245 30 442 24 North Carolina ...... 2.114 50 151 47 23 New Y0111 ... -·················-····-··-···-·-··· 2,490 21 503 22 l*Jahoma ·-·········································· 2,355 42 170 44 =:~::=:~:::::::::=::::::::::::::::::::::=:=:.::: 1 : ~ 3 Pennsylvania ...... _...... 2,399 25 335 34 South carolina ...... 2,547 32 392 29 South ~rolina ...... ·-·-·- 1.24 11 Midwest: Tennessee ...... 2,757 21 560 16 13 Illinois...... ---·---····-····---- 1,950 46 179 42 2,347 43 519 21 ~~~::::::::::::::::::::::::=::::::::::::::: : ::=:~== l : ~! 4 lnliana ·-·······--··-·-·-···----····--···---· 1,849 49 388 30 4,503 I 1,426 2 West Virginia ...... --·-···· 1.08 26 Iowa ··-··-·· .. -.... ----········--·-··-··· 1,792 50 147 48 ~~::::.=::=:::::=:::::::::::::::: 2,404 39 94 50 West: lllidipn...... ----·-····-·-·- 1,957 45 200 40 West: Arizona ·········---···--····-·-·-·--·····----······ 1.10 20 llinnesoli ...... ----· 2,091 42 391 29 Alasb ...... 4,296 2 1,009 9 25 (Jio______...... _ ..... california ···-·-····-·--·····-·---·-···-- ·-·--···-· 1.08 Wisr:lonsin _. _.. ______2,160 38 405 28 Arizllna ...... ·-···-······---········-·· 2.751 23 581 15 Hawaii····-·····-····--···--········--······ .. ····-········---- 1.39 6 1,872 48 226 37 California·····-··-··········--········-·····-- 3,429 10 1,226 6 16 South: QJioradD ·-·--·-··-······---.. ········-·········· 2,824 18 669 13 :We:::::=:::::::::::::=::: : =~-~~~===~ u~ 5 AllblmaArURsas ....._ - ...... ______---·--·--·------2,468 22 330 35 Hawaii ...... 3,928 4 522 20 Nelnska..Montana. •.... ______·-····--··-······-·-·_____····-·····"-··-··--··-·-··______.. __ 1.941.10 19 2,221 34 266 36 ldaiiD _____...... 2,420 38 385 30 28 Florida ...... ----·-·---·----- 2,795 11 487 23 Kansas ...... 2,938 15 691 12 New Mexa ..------· " 1.67 2 24:774: CONGRESSIONAL RECORD-SENATE September 11, 1981, TABLE 9A.-TAX/EXPENDITURE RATIOS Of ADVANTAGED National Ta:r Journal, XXXVI, No. 4. De stance, are collected in states in which a STATES-Continued cember, 1983. company's headquarters are located, but the --. "The New Federalism in Illinois," taxes are actually paid in many states in [In miions ~ OOIIals] nlinois Iasues. March, 1982. which offices or subsidiaries of the company --. "Turning Back the Clock: The New are located. Rank Federalism in Illinois, Part II," nlinois Issues. June, 1982. III. DESIGNATION OF REALLOCABLE FEDERAL North Dllulta ...... 1.16 15 --. "Where the Shoe Pinches: The EXPENDITUIU!S South Dllulta ...... 1.26 Utili ...... 1.20 l~ 1983 Reagan Budget," Economic OuUook Which types of Federal expenditures are Washin&IDn ...... 1.13 17 USA. Spring, 1982. exempt from the bill. Congressional Research Service , Estimated Federal Ta:r Pay which by law are limited to certain states. ments of Individual States Compared to Es These include the Bureau of Reclamation, TABLE 10.-TAX/EXPENDITURE RATIOS Of DISADVANTAGED timated Federal Ta:r OuUays in the States, the Tennessee Valley Authority, the Bonne Fiscal Years 1976-1982. Washington, D.C., ville Power Administration. STATES EUGIBLE FOR PROCUREMENT PROVISIONS OF published annually. Salaries and wages of Federal employees; THE STATE MINIMUM RETURN ACT Miller, Victor J. "Recent Changes in Fed Maintenance of Federal buildings and in [FISCal year 1983] eral Grants and State Budgets." Offsetting receipts ; and the Federal Fisc, VII, Fiscal Year 1982. Direct payments to individuals, including July 25, 1983. Social Security; unemployment compensa .... EnalaAd:Connecticut ...... $0.94 33 Northeast-Midwest Institute. The Federal tion; Medicare; Food Stamps; Black Lung New Hampshire ...... 97 31 Balance of Pavments: Regional Implica- Mid-AIIantic: Disability; Supplemental Security Income; New Yen ...... - .... - ...... - ...... - .92 35 tions of Government Spending. Washington, National Guaranteed Student Loans; Pell Pennsylvania ...... 98 29 D.C.: Northeast-Midwest Institute, August, grants; lower income housing assistance; South: 1980. North Carolina ...... _ ...... - .. .95 32 social insurance and retirement payments West: Pack, Janet Rothenberg. "The States' for railroad workers; excess earned income Alaska ...... 94 34 Scramble for Federal Funds: Who Wins, tax credits; veterans assistance; Federal Kansas._...... - ...... ,_,,__ ., _ .. ,_ .. . .97 30 Who Loses?" Journal of Policy Analysis and Nevada...... ,_.. ,...... •92 workers; compensation, retirement, and life Oreeon ...... 90 ~ Management, I, No. 2 <1982> . and health insurance. Resek, Robert W. and Kosobud. Richard Scute: See IJble 9. F. . The Midwest Economy: Issues IV. REALLOCATION AUTHORITY and Policy: The Federal Balance of Pay Who administers adjustments in spending. NoTES ments with Midwest States. Champaign, llli- The head of each Federal agency will real nois: Bureau of Economic and Business Re locate spending to eligible states necessary 1. Advisory Commission on Intergovern search, University of Illinois at Urbana to meet the requirement of a 90 percent mental Relations , Regional Champaign, 1982. return by Fiscal 1989, after consultation Growth: Flows oJ Federal Fund8, 1952-76. Schoeplein, Robert N., The Midwest Econ with the Director of OMB. Washington, D.C., Government Printing omy, Issues and Policy: The Federal Balance For the purpose of these adjustments in Office, June, 1980; Lilian Rymarowicz, Esti of Pavments with Midwest States. Cham spending, all administrative requirements mated Federal Ta:r Payments of Individual paign, illinois: University of illinois at will de- after the end of each Fiscal Year, the Direc page 13. termine the eligibility of states on an tor of OMB will report to Congress regard BIBLIOGRAPHY annual basis, after consultation with the Di ing the progress made by each agency. Advisory Commission on Intergovernmen rector of the Census Bureau, who publishes How these firms receive contract awards. tal Relations . Regional data on Federal expenditures in states, and For competitive procurements, a firm that Growth: Flows of Federal Fund8, 1952-76. the Commissioner of the Internal Revenue will perform the contract in an eligible state Washington, D.C.: Government Printing Service , who collects taxes from the will receive a contract award if its bid is Office, June, 1980. states. The Commissioner of the IRS will lower or equivalent to the bid of a firm that Advisory Commission on Intergovernmen consult with the National Tax Foundation, will perform the contract in an ineligible tal Relations. Intergovernmental Perspec a private, non-profit organization that has a state. tive. IV, No. 4. Washington, D.C.: Govern widely-accepted methodology for allocating For noncompetitive procurements, a firm ment Printing Office, Fall, 1978. actual tax burdens in states. These actual that will perform the contract in an eligible Anton. Thomas J. "The Regional Distri tax burdens often differ from tax collec state will receive a contract if it can com bution of Federal E xpenditures, 1971-1980," tions from states. Corporate taxes, for in- plete th e contract at a lower or approxl- September 11, 1981,. CONGRESSIONAL RECORD-SENATE 24775 mately equivalent price as a firm that will velopment these provisions, it must be determined by <4> Offsetting receipts-Examples-sale of minois.-Aid to Families with Dependent the head of the contracting agency to have mineral leasing rights owned by the federal Children.-Increase from $442 million to met the requirements of section 8<7> of government, sale of timber from national $485 mllllon, an increase of approximately the Small Business Act, including capabil forests, sale of offshore oil leasing rights, $43 million, based on a percentage increase ity, competency, capacity, credit, integrity, sale of water for irrigation. from 5.6 percent to 6.2 percent of the na.. perseverance, and tenacity. Direct Payments to Individuals (Page tiona! total. quirements utilized for the issuance of a cer 3, line 13-Page 4, line 5 >. Medicaid.-Increase from $728 million to tificate of competency, required of all firms Supplemental Security Income-Supple $905 mllllon. an increase of approximately seeking to obtain government contracts.> In mental income for poor and elderly people $177 mllllon, based on a percentage increase the case of pre-qualification requirements, in addition to Social Security. It is needs from 4.3 percent to 4.8 percent of the na the firm must be notified in writing of nec tested, not based on income like Social Secu tional total. essary standards and it must meet those rity. standards in a timely manner. Wastewater Treatment-Increase from Social Insurance Jor Railroad Worker8- $142 million to $194 million. an increase of V. REALLOCATION Jo:CHANISIIS (COntinued) Unemployment insurance payments for rail approximately $52 million, based on a per Federal Orants.-For all grant programs road workers; benefits for Conrail employ centage increase from 5.9 percent to 6.5 per of the various Federal agencies, such as the ees and Milwaukee railroad workers. cent of the national total. Department of Transportation, the Depart Section &-Reallocation Authority . In or $110 mllllon. of the grant program in the crease of 10 percent in its percentage share crease from $530 million to $564 million. an first Fiscal Year after enactment of the bill, of total contract dollars, based on an aver increase of approximately $34 million. based assuming the program was funded at the age of its percentage shares over the past on a percentage increase from 2. 7 percent to same level in that year. three fiscal years. 3.0 percent of the national total. How adjustments are made without overly HypotheticaL-If a state received an aver Minnesota..-Wastewater Treatment (86' disrupting programs and ineligible states. age of $5 bllllon in contracts over the past return>. Increase from $47 million to $63 ProJects that are individually authorized three years, and the total contracts awarded million, an increase of approximately $16 and appropriated will only years, the state's average share would be 5 1.6 percent to 2.1 percent of the national be covered by the bill to the extent practi percent. Under the bill, the state would re total. cal. ceive 5.5 percent in the first year, or $5.5 bil Ohio.-Urban Mass Transit <87~ return). No state will receive more than a 10 per lion. a 10 percent increase. In the second Increase from $102 million to $120 million. cent cut in any one program over the previ year, the state would receive 6.1 percent, or an increase of approximately $18 million, ous Fiscal Year directly as a result of the $6.1 bllllon, and so forth, assuming that based on a percentage increase from 2.8 per bill. total contracts remained at $100 bllllon per cent to 3.3 percent of the national total. No reallocation can be made if it will year. result in any state receiving less than a 90 Procurement-State Example . fflinois-Total procurement would in Schedules of the United States to clar This bill cannot be amended without spe ify the duty treatment of certain types cific reference to this bill. crease from $2.2 billion to $2.5 bllllon, an in crease of <75' return) approximately $300 of plywood; to the Committee on Fi VII. EFFECTIVE DATE mllllon, based on a percentage increase from nance. The bill will take effect in the first Fiscal 1.4 percent to 1.6 percent of the national Year after enactment of the bill. total. TARIFF TREATMENT OF CERTAIN TYPES OF Defense procurement would increase from PLYWOOD GUIDE TO THE STATE MINnroJ,( RETURN ACT $1.48 bllllon to $1.63 billion, an increase of Mr. GORTON. Mr. President, the OF 1984 approximately $150 million, based on a per measure I am introducing today is Section 4-Ellgible States (Page 2, lines centage increase from 1.2 percent to 1.3 per aimed at correcting an anomaly in the 11-22). cent of the national total. U.S. Tariff Schedules. Under existing States with less than a 90 percent Indiana-Total procurement would in Tariff Schedules, edge-worked ply return eligible for all sections of the bill <14 crease from $2.2 billion to $2.5 billion, an in wood sheets-tongue and groove or states>: crease of (83' return> approximately $300 Colorado, Delaware, illinois, Indiana, million, based on a percentage increase from shiplap plywood-are being treated by Iowa, Louisiana, Michigan, Minnesota. New 1.4 percent to 1.6 percent of the national the CUstoms Service not as plywood Jersey, Ohio, Oklahoma, Texas, Wisconsin, total. sheets, but as building boards chiefly Wyoming. Michigan-Total procurement would in "used in the construction of walls, ceil States with less than a 100 percent crease from $1.9 bllllon to $2.4 billion, an in ings, or other parts of buildings." The return eligible for section regarding pro crease of <79¢ return> approximately $500 tariff rate on this latter category is curement <9 states>: mllllon. based on a percentage increase from less than half the former, resulting in Alaska, Connecticut, Kansas, Nevada, New 1.37 percent to 1.51 percent of the national Hampshire, New York, North Carolina, total. an inflow of edgeworked Canadian ply Oregon. Pennsylvania. Federal Grants.-Each state receives 110 wood sufficient to cause significant Section 5-Designation of Reallocable percent of its average share over the past distress to plywood manufacturers in Federal Expenditures. three fiscal years. For example, if a state the Pacific Northwest. Spending categories not included Water and energy programs restricted cent, it will receive $110 million in the first toms Service's current practice is an to regions, including Tennessee Valley Au year after the bill has been enacted, or 11 thority , percent. In the second year, it will receive absurdity. Tongue and groove plywood Bonneville Power Administration by inserting immedi February, in EEOC against Hernando ately before the semicolon at the end there purpose in drafting the bill in this of the following: "or any edge of which has Bank, the fifth circuit held that the manner was to ensure that the bill's been tongued, grooved, lapped, or otherwise legislative veto provision was severable only consequence is to overturn the worked"; from the rest of the Reorganization decision in EEOC against CBS, Inc. <2> in paragraph by inserting immedi Act and that authority over ADEA We did not, it the name of simplicity, ately before the semicolon at the end there was validly transferred to the Commis of the following: "or any edge of which has sion. Last month, the sixth circuit, in use this bill to create new rights or been tongued, grooved, lapped, or otherwise Muller Optical Company against new responsibilities. As written, it worked"; and EEOC, also affirmed that the EEOC simply protects the existing delegation <3> in paragraph by striking out "chief of authority for the enforcement of ly used in the construction of walls, ceilings, may enforce ADEA, on the grounds ADEA and the Equal Pay Act. For or other parts of buildings" and inserting in that an unexercised legislative veto these reasons, I hope that Congress lieu thereof "other than plywood, wood does not violate the constitutional sep will act on this bill expeditiously. veneer panels, or cellular panels". aration of powers when the executive SEc. 2. The amendments made by the first action approved by Congress, the Mr. President, I ask unanimous con section of this Act shall apply with respect sent that the bill be printed in full in transfer of authority over ADEA and the RECORD. to articles entered, or withdrawn from ware the Equal Pay Act, does not affect house for consumption, on or after the date There being no objection, the bill of the enactment of this Act. substantive rights or alter enforce was ordered to be printed in the ment powers. RECORD, as follows: By Mr. HATCH pursuant to sections ganization plan to both Houses of section 707 of title VII of the Civil 4(d)(l); 4; 9; 11 (a), (b), and ; 16 and ; and 17 of the Fair Labor Standards Act, Congress, and the plan would become Rights Act of 1964, as amended. as amended (29 U.S.C. 204(d)0); 204; 209; effective unless either the Houses of It should be noted that this bill is 211 (a), , and ; 216 (b) and ; and Representatives or the Senate object not intended to send a signal that Con 217)) and section 10(b)(l) of the Portal-to ed to the plan within 60 days of its gress now believes all of the statutes Portal Act of 1947, as amended <29 U.S.C. submission. containing legislative veto provisions 259). A reorganization plan submitted to are invalid nor that new legislation is TRANSFER OF AGE DISCRXJIUNATION Congress in 1978, among other things, necessary to overcome the problems ENFORCEMENT FUNCTIONS transferred authority over ADEA and posed by the Supreme Court's decision SEC. 3. All functions vested in the Secre the Equal Pay Act from the Depart in Chada. To the contrary, I believe tary of Labor or in the Office of Personnel ment of Labor to the Equal Employ- that the opinions of the fifth and Management pursuant to sections 2, 4, 7, 8, 1964, as amended <42 U.S.C. 2000e-14), are The basis for the court's decision 9, 10, 11, 12, 13, 14, and 15 of the Age Dis hereby transferred to the Equal Employ was the fact that the 1977 Reorganiza crimination in Employment Act of 1967, as ment Opportunity Commission. The Equal tion Act, which provided the President amended <29 U.S.C. 621, 623, 626, 627, 628, Employment Opportunity Coordinating 629, 630, 631, 632, 633, and 633a>. are hereby Council is hereby abolished. general authority to promulgate exec utive branch reorganization plans, transferred to the Equal Employment Op SAVINGS PROVISION portunity Commission. All functions related contained a "one-house legislative to age discrimination administration and en SEC. 8. Administrative proceedings includ veto" provision, a concept which has forcement pursuant to sections 6 and 16 of ing administrative appeals from the acts of been held uncontitutional by the U.S. the Age Discrimination in Employment Act an executive agency Supreme Court in the landmark of 1967, as amended <29 U.S.C. 625 and 634), Chadha case of last year. Most impor are hereby transferred to the Equal Em commenced or being conducted by or ployment Opportunity Commission. against such executive agency will not abate tantly, unlike two other Federal cir by reason of the taking effect of this Act. cuit courts which have considered the TRANSFER OP EQUAL OPPORTUNITY IN FEDERAL Consistent with the provisions of this Act, issue, the second circuit declined to DIPLOYKENT ENPORCEIIENT FUNCTIONS all such proceedings shall continue before uphold the EEOC enforcement au SEC. 4. All equal opportunity in Feder the Equal Employment Opportunity Com al employment enforcement and related mission otherwise unaffected by the trans thority on the basis that the legisla functions vested in the Office of Personnel fers provided by this Act. Consistent with tive veto provision was severable from Management pursuant to section 717 the provisions of this Act, the Equal Em the remainder of the Reorganization and of the Civil Rights Act of 1964, as ployment Opportunity Commission shall Act or that Congress had subsequently amended <42 U.S.C. 2000e-16 and or its successor the law. our introduction of this legislation function of making a preliminary determi INCIDENTAL TRANSFERS should not be taken as an indication nation on the issue of discrimination when that we approve of the second circuit ever, as a part of a complaint or appeal SEC. 9. So much of the personnel, proper ty, records, and unexpended balances of ap holding in EEOC against CBS, Inc. before the Office of Personnel Management Indeed. the Commission had indicated on propriations, allocations, and other funds other grounds, a Federal employee alleges a employed, used, held, available, or to be that it plans to seek an en bane re violation of section 717 of the Civil Rights made available in connection with the func hearing and possible further appeal of Act of 1964, as amended <42 U.S.C. 2000e- tions transferred under this Act, as the Di that case. It could be that future de 16), provided that the Equal Employment rector of the Office of Management and velopment might render this legisla Opportunity Commission retains the func Budget shall determine, shall be transferred tion unnecessary. to the appropriate department, agency, or tion of making the final determination con In the interim, however, there is a cerning such issue of discrimination. component at such time or times as the Di rector of the Office of Management and cloud of uncertainty over the author TRANSPER OP FEDERAL EMPLOYMENT OF HANDI· Budget shall provide, except that no such ity of the EEOC to carry out its vital CAPPED INDIVIDUALS, ENFORCEMENT FUNC unexpended balances transferred shall be mission of enforcing the several stat TIONS used for purposes other than those for utes protecting the elderly from em SEC. 5. All Federal employment of handi which the appropriation was origlnally ployment discrimination, particularly capped individuals enforcement functions made. The Director of the Office of Man within the geographical confines of and related functions vested in the Office of agement and Budget shall, as necessary, Personnel Management pursuant to section Council abolished herein and for such fur necticut and Vermont. If that cloud of 501 of the Rehabilitation Act of 1973 <29 ther measures and dispositions as such Di uncertainty is not promptly removed U.S.C. 781), are hereby transferred to the rector deems necessary to effectuate the by other means, we believe Congress Equal Employment Opportunity Commis purposes of this Act. will move expeditiously to enact what sion. The function of being cochairman of EFFECTIVE DATE ever legislation may be necessary to the Interagency Committee on Handicapped ensure that the several statutes which Employees now vested in the Chairman of SEc. 10. Sections 2 through 5 of this Act the Office of Personnel Management pursu shall take effect on July 1, 1979, and sec protect the rights of individuals from ant to section 501 is hereby transferred to tions 6 and 7 of this Act shall take effect on age discrimination in employment are the Chairman of the Equal Employment July 1, 1978. fully enforced. Opportunity Commission. e Mr. THURMOND. Mr. President, I Mr. President, the legislation we are TRANSFER OF PUBLIC SECTOR 707 FUNCTIONS am pleased to join with the distin submitting today essentially ratifies SEC. 6. Any function of the Equal Employ guished chairman of the Labor and and codifies the transfer to the EEOC ment Opportunity Commission concerning Human Resources Committee, Senator of enforcement authority over various initiation of litigation with respect to State HATCH, and other Senators in sponsor employment discrimination statutes or local government, or political subdivi ing legislation to ratify the transfer of encompassed within the reorganiza sions under section 707 of title VII of the enforcement authority for the Age tion plan No. 1 of 1978. It may be that Civil Rights Act of 1964, as amended <42 U.S.C. 2000e-6), and all necessary functions Discrimination in Employment Act this legislation can be refined and im related thereto, including investigation, and certain other statutes to the proved, and as earlier mentioned, de findings, notice, and an opportunity to re Equal Employment Opportunity Com velopments could render the legisla solve the matter without contested litiga mission [EEOC]. tion unnecessary. There must be no tion, are hereby transferred to the Attorney The authority of the EEOC to en doubt, however, that the commitments General, to be exercised by him in accord force this key Federal statute, which to protecting our citizens, particulary ance with procedures consistent with said prohibits employment discrimination older Americans, from unlawful dis title VII. The Attorney General is author against older workers, has been called crimination in the workplace will be ized to delegate any function under section 707 of said title VII to any officer or em into question by a recent decision of fulfilled. It is in that spirit that I join ployee of the Department of Justice. the U.S. Court of Appeals for the with my several distinguished col second Judicial Circuit. On August 28, leagues and cosponsors in submitting TRANSFER OP FUNCTIONS AND ABOLITION OF THE EQUAL EMPLOYMENT OPPORTUNITY COORDI 1984, in the case EEOC against CBS, this legislation today.e NATING COUNCIL Inc., the second circuit invalidated the Mr. HEINZ. Mr. President, as chair SEC. 7. All functions of the Equal Employ authority of the EEOC, transferred to man of the Senate Aging Committee, I ment Opportunity Commission Coordinat it by President Carter's reorganization support Senator HATCH's bill to en Ing Council, which was established pursuant plan No. 1 of 1978, to enforce the Age force both the Age Discrimination in to section 715 of the Civil Rights Act of Discrimination in Employment Act. Employment Act [ADEAl and the
81-059 ~~(Pt. 18) 24778 CONGRESSIONAL RECORD-SENATE September 11, 1984 Equal Pay Act. This legislation was employment opportunities for older In addition, the families of head made necessary by an August 28 deci persons who are willing and able to injury victims are faced with a number sion in the Second Circuit Court of work. Age discrimination in employ of emotional and financial problems. Appeals. The second circuit's decision ment continues to be a major reason Many head injury victims are coma stated that the transfer of authority why middle-aged and older workers tose for extended periods of time and for the ADEA was unconstitutional be are systematically excluded from the need special services and treatment; cause it was authorized by the Reorga opportunity to work. The first legisla however, there is a lack of facilities de nization Act of 1977, a statute which tive response to this concern was the signed to meet the special treatment contained a "one-house legislative ADEA. and rehabilitation needs of the head veto" provision. The court was not During the first 10 years after its en injured. As a result, many families, taking issue with the merits of the actment, enforcement of the ADEA themselves, are left with the burden of transfer, nor was it commenting on was the responsibility of the Depart caring for their disabled family mem the effectiveness of the EEOC in car ment of Labor. In 1979, by Executive bers. rying out its enforcement activities. order, enforcement responsibility for A great many of these families have Rather, the court merely drew upon the ADEA shifted from DOL to the experienced great frustration and a the precedent established in the Su EEOC. Age discrimination charges sense of helplessness in their search preme Court's Chada decision and now constitute a significant portion of for appropriate facilities and treat ruled that the transfer was unconsti the EEOC's caseload. Indeed, the age ment for head-injury victims. As a con tutional because of a legislative veto related jurisdiction is the fastest grow sequence, they have joined together decision. ing of all civil rights enforcement stat with a number of health care profes It should also be noted that there utes. A report by the EEOC placed the sionals to form the national head have been two recent decisions, one in nfunber of age-related charges filed injury foundation. This organization, the fifth circuit and one in the sixth during fiscal year 1983 at 15,303. The together with its numerous State circuit, affirming that the EEOC may magnitude of the problem of age dis chapters, has been working tirelessly enforce the ADEA. I agree with Sena crimination, as well as the increasing to educate the public about the prob tor HATCH that this bill is not intended importance of enforcement measures lem of head injury and the needs of to send a signal that Congress now be designed to combat such discriminato disabled head-injury victims. The Na lieves all of the statutes containing ry practices, underscores the necessity tional Head Injury Foundation has legislative veto provisions are invalid. for the EEOC to have clear authority committed itself to bring the problems Rather, I believe that the opinions of to enforce the ADEA. of head injury to national attention the fifth and sixth circuits which I I urge my colleagues to join me in and to provide the families of head just mentioned are accurate and that cosponsoring this legislation. injury victims with the necessary fa if appealed, the decision by the second cilities and resources. circuit would be overturned. By Mr. DANFORTH (for himself and Mr. KENNEDY): Senator KENNEDY and I urge you to However, the necessity of this legis support this effort by designating Oc lation, Mr. President, is measured in S.J. Res. 352. Joint resolution desig nating October 1984 as "National tober 1984 as "National Head Injury human terms. If we wait for the judi Awareness Month." I ask unanimous cial process to take its course, the 21 Head Injury Awareness Month"; to the Committee on the Judiciary, consent that this joint resolution be ADEA cases now pending in the printed in the RECORD. second circuit are jeopardized. Each of NATIONAL HEAD INJURY AWARENESS MONTH There being no objection, the joint those cases involves the employment e Mr. DANFORTH. Mr. President, resolution was ordered to be printed in rights of older Americans, who by law today I am introducing a joint resolu the RECORD, as follows: were guaranteed the opportunity to tion on behalf of myself and Senator have their grievances heard in a court KENNEDY to designate October 1984 as S.J. RES. 352 Whereas an estimated four hundred and of law. "National Head Injury Awareness fifty thousand to seven hundred thousand Furthermore, the second circuit's de Month." people require hospitalization each year for cision could have negative conse Recent estimates indicate that over head injuries; quences on the 150 ADEA cases pend 100,000 Americans die from head inju Whereas an estimated one hundred thou ing in other circuit courts nationwide. ries every year. Most of these tragic sand of these victims die as a result of head mtimately, failure to restore the deaths are caused by motor vehicle or injuries; EEOC's enforcement authority means sports accidents. In addition, each year Whereas approximately fifty thousand that 28 million older Americans would 450,000 to 700,000 people sustain head head injury victims, more than two-thirds of whom are under the age of thirty, suffer be without legal protection against age injuries serious enough to require hos permanent brain damage that prevents discrimination in employment. I might pitalization, and 50,000 of these indi them from returning to schools, jobs, or add, Mr. President, that the court rec viduals are permanently disabled. normal lifestyles; ognized the potential harm that could These victims suffer permanent brain Whereas the effects of head injuries are result from its decision and, therefore, damage that prevents them from re emotionally and financially devastating to stayed filing its decision until Decem turning to schools, jobs, and normal families; ber 31, 1984, suggesting that this lifestyles. The tragedy of this situa Whereas there is a serious lack of facili would give Congress an opportunity to tion is increased by the fact that two ties designed to care for the special needs of the head injured; and enact corrective legislation. This bill is thirds of these disabled individuals are Whereas long-term medical research on just that, it will simply enact the reor young people, under the age of 30. brain-injured patients is incomplete: Now, ganization plan of 1978, thus protect These individuals permanently dis therefore, be it ing the authority of the Commission abled by head injuries are left with Resolved by the Senate and House of Rep to enforce the ADEA, the Equal Pay mental and physical impairments, resentatives of the United States of America Act, and section 501 of the Rehabilita speech problems, and behavioral disor in Congress assembled. That October 1984 is tion Act of 1973, as wall as the author ders. Often these disabilities are not designated "National Head Injury Aware apparent to the causal observer, but ness Month" and the President is authorr ity of the Department of Justice to ized and requested to issue a proclamation bring suit under section 707 of title their effects are still debilitating. In calling on the people of the United States to VII of the Civil Rights Act of 1964, as many instances, the victims of serious observe that month with appropriate pro amended. head injury experience frequent fa grams and activities.e Mr. President, as you know the tigue, forgetfulness, irritability, and Senate Aging Committee has had a depression that make it extremely dif By Mr. BYRD: longstanding interest in policies and ficult or impossible from them to S.J. Res. 353. Joint resolution to des legislation that promote continued maintain a job or attend school. ignate the week of February 3, 1985, September 11, 1984 CONGRESSIONAL RECORD-SENATE 24779 through February 9, 1985, as "Nation parents, teachers, administrators, communi S.2380 al School Guidance and Counseling ty leaders, school board members, and legis At the request of Mr. HEINz, the Week"; to the Committee on the Judi lators; and name of the Senator from Maryland ciary. Whereas it is appropriate to recognize the dedicated individuals who serve as profes [Mr. SARBANEsl was added as a cospon NATIONAL SCHOOL GUmANCE AND COUNSELING sional counselors in the schools of the sor of S. 2380, a bill to reduce unfatr WEEK Nation: Now, therefore, be it practices and provide for orderly trade Mr. BYRD. Mr. President, I am Resolved by the Senate and House of Rep in certain carbon, alloy, and stainless today introducing a joint resolution to resentatives of the United States of America steel mill products, to reduce unem designate the week beginning Febru in Congress assembled. That the week of ployment, and for other purposes. ary 3, 1985, as "National School Guid February 3, 1985, through February 9, 1985, ance and Counseling Week." is designated as "National School Guidance s. 2576 Founded in 1953, the American and Counseling Week", and the President is At the request of Mr. BINGAMAN, the School Counselor Association is an or authorized and requested to issue a procla name of the Senator from Florida mation calling upon all public officials and [Mrs. HAWKINs] was added as a co ganization which serves its members the people of the United States to celebrate and the public through programs that such week with appropriate ceremonies and sponsor of S. 2576, a bill to establish a advance guidance and counseling in all activities. commission to study and make recom school settings: elementary, middle/ mendations concerning the interna junior, secondary, and postsecondary. tional trade and export policies and The theme of the sixth annual ob ADDITIONAL COSPONSORS practices of the United States. servance of "National School Guid s. 2768 ance and Counseling Week" is "School s. 1128 At the request of Mr. LEAHY, the At the request of Mr. MATHIAs, the Counseling: the Human Connection." name of the Senator from Connecticut This theme emphasizes the special name of the Senator from Connecticut [Mr. DoDD] was added as a cosponsor [Mr. WEICitER] was added as a cospon role school counselors fulfill in help sor of S. 2768, a bill to provide for the ing to meet the needs of students and of S. 1128, a bill entitled the "Agricul tural Productivity Act of 1983." education in the United States of cer their families. Counselors are an es tain students of limited financial sential part of the education team. s. 1746 Working with teachers, administra At the request of Mr. RUDMAN, the means from developing countries. tors, and special services personnel, name of the Senator from Illinois [Mr. s. 2770 counselors provide students academic PERCY] was added as a cosponsor of S. At the request of Mr. MELcHER, the assistance in selecting programs of 1746, a bill to require that the Federal name of the Senator from Arkansas study. This is important in helping Government procure from the private [Mr. PRYOR] was added as a cosponsor students meet their future career sector of the economy the goods and of S. 2770, a bill to protect consumers goals. Counselors also work with stu services necessary for the operations and franchised automobile dealers dents to help develop personal skills, and management of certain Govern from unfair price discrimination in the such as decisionmaking and self-aware ment agencies and that the Director of sale by the manufacturer of new ness, and to generally assist our young the Office of Management and Budget motor vehicles, and for other pur people in the difficult process of ma and the Comptroller General of the poses. turing-growing up. United States identify the activities of s. 2869 During "National School Guidance the Federal Government to produce, At the request of Mr. LEAHY, the and Counseling Week" let us join to manufacture, or otherwise provide names of the Senator from Hawaii gether to focus public attention on goods and services which should be [Mr. INOUYE], the Senator from Illi guidance and counseling programs and provided by the private sector and pre nois [Mr. PERcY], and the Senator increase the understanding of the pare a schedule for transferring such from West Virginia [Mr. RANDOLPH] public regarding the importance of activities to the private sector. were added as cosponsors of S. 2869, a these programs to our children. I urge s. 1747 bill to amend the Internal Revenue my colleagues to give this resolution At the request of Mr. A..ru\(sTRONG, Code of 1954 to provide an income tax their full consideration and complete the name of the Senator from Hawaii credit for expenses incurred by an in support. [Mr. INOUYE] was added as a cosponsor dividual taxpayer for the purchase of I ask unanimous consent that the of S. 1747, a bill to amend title 38, television subtitle equipment to be full text of the joint resolution be United States Code, to establish two used by a hearing-impaired individual. printed in the RECORD. new programs of educational assist There being no objection, the joint s. 2894 ance for veterans of peace time serv At the request of Mr. MELcHER, the resolution was ordered to be printed in ice, to close the Post-Vietnam Era Vet the RECORD, as follows: name of the Senator from Nebraska erans' Educational Assistance Program [Mr. ExoN] was added as a. cosponsor S.J. RES. 353 to new participants, and to repeal the Whereas there are approximately seventy of S. 2894, a bill to amend the Internal December 31, 1989, termination date Revenue Code of 1954 to clarify the thousand professional counselors working of the Vietnam-era GI bill, and for with the teachers and other educational application of the imputed interest personnel of the Nation; other purposes. and interest accrual rules in the case Whereas professional counselors are in s. 2139 of sales of residences, farms, and real strumental in the mental development and At the request of Mr. HEINz, the property used in a trade or business. academic and career planning of the stu name of the Senator from Kentucky s. 2917 dents of the Nation; [Mr. HUDDLESTON] was added as a co Whereas guidance and counseling pro sponor of S. 2139, a bill to improve the At the request of Mr. TsoNGAS, the grams enable students to learn essential life names of the Senator from Maine [Mr. skills, and thus benefit society by producing operation of the countervailing duty, MITCHELL], the Senator from Alabama better prepared adults; antidumping duty, import relief, and [Mr. HEFLIN], the Senator from Alaska Whereas professional counselors are an in other trade laws of the United States. [Mr. MURKOWSKI], the Senator from tegral part of the educational process of the s. 2266 Nation; New Hampshire [Mr. HUMPHREY], the Whereas national and community efforts At the request of Mr. CRANSTON, the Senator from Connecticut [Mr. DoDD], are needed if guidance and counseling pro name of the Senator from Massachu and the Senator from Rhode Island grams are to be effective; setts [Mr. KENNEDY] was added as a [Mr. CHAFEE] were added as cospon Whereas support for counseling programs cosponsor of S. 2266, a bill to grant a sors of S. 2917, a bill to confer citizen is needed from ind!viduals who take actions Federal charter to Vietnam Veterans ship posthumously on Corporal Wla that significantly affect children, such as of America, Inc. dyslaw Staniszewski. 24780 CONGRESSIONAL RECORD-SENATE September 11, 1984 SENATE CONCURRJ:NT RESOLUTION 94 of the Roth-Tsongas resolution on Congress should recognize it and At the request of Mr. MoYNIHAN, the South Africa. expose it. name of the Senator from California We have observed events unfolding [Mr. CRANsToN] was added as a co in South Africa in recent weeks and sponsor of Senate Concurrent Resolu we are quite frankly shocked at what SENATE RESOLUTION 440-RE tion 94, a concurrent resolution ex we have seen. The Government in LATING TO MODIFYING THE pressing the sense of Congress that South Africa has gone to great lengths UNITED STATES-SOVIET UNION the president of Syria should permit to sell a series of constitutional GRAIN AGREEMENT Jewish emigration. changes as a program of multiracial Mr. BOREN (for himself, Mr. SENATE CONCURRJ:NT RESOLUTION 117 democracy. Two separate parliamenta BAUCUS, Mr. BENTSEN, Mr. BUMPERS, At the request of Mr. LAUTENBERG, ry bodies, we have been told, will allow Mr. BURDICK, Mr. EXON, Mr. LEAHY, the name of the Senator from Texas "Coloreds" and "Asians" to participate Mr. NICKLES, Mr. PRYOR, and Mr. ZOR [Mr. ToWER] was added as a cosponsor in the direction of national affairs. INSKY) submitted the following resolu of Senate Concurrent Resolution 117, But when the time came to measure tion; which was referred to the Com a concurrent resolution relating to the "Colored" and Asian support for these mittee on Foreign Relations: promotion of technological innovation changes, the Government resorted to in computer software and the protec the police state tactics it knows so well S. RES. 440 tion of computer software. to suppress peaceful political opposi Whereas the United States' surplus of grain remains at an unreasonably high tion to these so called democratic re level; SENATE CONCURRENT RESOLU- forms. Whereas the price U.S. farmers receive for TION 139-CONDEMNING On the eve of the elections to elect grain products is well below the full cost of SOUTH AFRICA'S ARRESTS "Colored" representatives to the new production; AND DETENTIONS OF POLITI parliament, some 200 leaders and ac Whereas American farmers are dependent CAL OPPONENTS tivists in the election boycott move on export sales for one-fourth of their income; Mr. ROTH The South African government should spurn racial justice. I think that many rently in effect; and immediately terminate its practice of arbi of my colleagues will want to join Sen (3) take all other appropriate actions to trary arrests and detention and should re ator RoTH and me in expressing provide for an increased quantity of U.S. ag lease those men and women who have been through this resolution our condemna ricultural products purchased by the Soviet arbitrarily imprisoned and having ex tion and dismay over these actions of Union. pressed, publicly and peacefully, their politi the South African Government. It is a e Mr. BOREN. Mr. President, on cal preferences. pernicious order of injustice for a behalf of Senators BAUCUS, BENTSEN, Mr. TSONGAS. Mr. President, I am regime to oppress its people; but to op BUMPERS, BURDICK, EXON, LEAHY, proud today to join with my eminent press in the name of "multiracial de NICKLES, PRYOR, ZORINSKY, and colleague from Delaware as coauthors mocracy" is a cynical sham and this myself, I am submitting a sense of the September 11, 1984 CONGRESSIONAL RECORD-SENATE 24781 Senate resolution which calls for the output in the U.S. economy and about chases of U.S. grain for delivery in President to immediately notify the 70 percent of this additional activity fiscal year 1985 already amount to 8.3 Soviet Union that additional amounts accrues to nonfarm sectors of the million metric tons, and the purchases of U.S. grain, above the 12 million economy. could exceed 20 million metric tons metric ton maximum, may be pur Mr. President, we must take every nearly 12 million metric tons of com chased by the Soviet Union during the possible action to maintain and fur and 8 million metric tons of wheat. second year of the current long-term ther develop our existing markets. If Soviet imports total nearly 45 mil grain agreement. The resolution fur One obvious way to do this is to take lion metric tons, as expected, the ther calls for the President to seek to better advantage of the Soviet market. United States has the opportunity to modify the agreement by establishing Regular U.S. and Soviet long-term capture just under 50 percent of the higher minimum and maximum agreement consultations are scheduled Soviet market. Certainly, if Soviet pur supply guarantees. I ask unanimous for mid-November. There is no reason chases peak at 50 to 55 million metric consent that the text of the resolution why we should wait until November to tons, as projected on the high side, the be printed in the RECORD at the con secure additional purchases of U.S. U.S. share will be even greater because clusion of my remarks. grain by the Soviet Union. For the of the readily available surplus of We are facing a crisis in the export past 10 weeks, the Soviets have been grain in the United States. of U.S. agricultural products which making unusually large purchases of These expected purchases will only must be recognized and reversed. The U.S. grain. In fact, the Soviet Union be possible if this administration continued strength of the dollar is has already arranged for delivery, heeds the President's campaign rheto placing our agricultural commodities before January 1, 1985, of the mini ric and extends the limits on the long at a competitive disadvantage to other mum level of grain provided for under term grain agreement. Formal assur countries that export agricultural the second year of the long-term ance will be necessary to promote ad commodities. Year after year, we are agreement. Under the long-term agree ditional sales because of the distrust experience a decline in both volume ment, the Soviet Union cannot make ful nature of the Soviets. If such an and value of agricultural exports. purchases in excess of 12 million assurance is immediately given, the In fiscal year 1983, total U.S. farm metric tons in any agreement year United States may avoid driving the product exports totaled $34.8 billion, without consulting first with the Soviets into markets of competitor na 11 percent less than a year earlier. United States. tions. The value exported in fiscal year 1983 It is imperative that we act now I would also like again to urge the represents approximately a 21-percent while the Soviets are on a buying administration to seek the inclusion of reduction when compared to the value spree. We should immediately notify rice in our long term grain agreement of products exported in fiscal year the Soviets that we are willing to pro with the Soviets. Currently, over 22 1981. For fiscal year 1983, alone, this vide for purchases of grain in excess of million hundredweight of rice is in decrease in value resulted in a 22-per the 12 million metric ton maximum. Government storage, and the extreme cent decrease in the agricultural trade Further, we should seek to modify the ly low rice prices, as we move into rice surplus. long-term agreement by establishing harvest, assure that millions more In fiscal year 1983, the volume of higher minimum and maximum hundredweight of rice will likely end U.S. agricultural products exported de supply guarantees than are currently up in Government storage. A signifi clined by 8 percent. When compared in effect. The resolution we are sub cant contributing factor is the admin to fiscal year 1981, the level of prod mitting today expresses the sense of istration's failure to help us maintain ucts exported in fiscal year 1983 were the Senate that the President should our foreign rice markets in the face of 11 percent lower. According to USDA, take these actions now in order to foreign competition, and the inclusion agricultural export volume is expected maintain and further develop this im of rice in the LTA would help open a to decline again this year, marking the portant market.e major new market to our embattled 4th consecutive year of decline. • Mr. BUMPERS. Mr. President, I am rice farmers. Over the last several The U.S. share of the export market pleased today to join with Senator years Soviet imports of rice have aver was 48 percent in 1981-82. With the BoREN as an original cosponsor of the aged 800,000 metric tons a year, and current decrease in American partici resolution urging the President to none of this rice comes from the pation in the world export market, it begin immediate consultations with United States. seems that the figures will continue the Soviets for the purpose of giving For the sake of our grain farmers, falling depreciatively, to below the formal notification of the raising of many who are not likely to survive in 1983-84 level of 38 percent. export limits set under the long term farming without drastic grain price This alarming trend must be re grain agreement. With current grain improvements, I urge the President to versed. A depression in the agricultur prices severely distressed, greater raise the LTA limits, and I call on my al export market inevitably has an im Soviet purchases throughout fiscal colleagues to help impress upon the pressive impact at home. Exports help year 1985 may be the only significant President the severity of this need.e farmers make the most efficient use of positive event affecting our grain their resources and keep costs lower, market. enabling U.S. consumers to spend a For fiscal year 1984, this administra AMENDMENTS SUBMITTED smaller share of disposable income on tion agreed to raise the export limit food than consumers in other nations. from its negotiated level of 12 million If production had to be reduced to the metric tons. Grain shipments to the TELEVISION AND RADIO IN THE level of domestic demand alone, farm Soviet Union are projected to exceed SENATE ers would have no choice but to allo 13.3 million metric tons by September cate fixed costs to the remaining 30 and the Soviets are attempting to output. This could increase unit costs arrange as great a quantity as possible to American consumers substantially. for September delivery because of the RANDOLPH AMENDMENT NO. Not only do agricultural exports pro failure of this administration to 3754 vide American consumers with a good extend the LTA limits for next year. food bargain, they also provide jobs. Yet, if the Soviet grain harvest falls Mr. RANDOLPH submitted an amend The U.S. Department of Agriculture below 170 million metric tons, as many ment intended to be proposed by him estimates that for every $1 billion of experts are suggesting, then the to the resolution When yeas and nays are ordered on For me this life source starts from the floor, each Senator shall vote from the Marian, my wife, and our children. who assigned desk of the Senator.". FORMER SENATOR JACOB have been my basic support, and extends to JAVITS COMMENTS ON THE relatives and friends, country, and the QUALITY OF LIFE world. But I have also been sustained by my FINANCIAL SERVICES doctors, who in diagnosing my case always COMPETITIVE EQUITY ACT • Mr. WEICKER. Mr. President. it is gave me two assurances: that I would be with great pride that I submit for the continent, and that my intellectual capac REcoRD an article written by our ities would be unaffected. Despite my handi TOWER AMENDMENT NO. 3755 friend and former colleague, Senator caps, I can speak, see, hear, taste, smell, Jacob K. Javits. I also am submitting a feel, even swallow . No Mr. ToWER submitted an amend matter how my other faculties might suffer, ment intended to be proposed by him summarizes a speech given by Jack to the use of my brain seems assured This, it to the bill until that goal is reached, I believe the med 1, 1984. I am a victim of what is generally called a ical profession should cooperate with efforts terminal disease. It is amyotrophic lateral to establish a test in cases of terminal ill sclerosis . which slowly disables mus ness that would enable us to determine who AUTHORITY FOR COMMITTEES cles by reducing the ability of the motor should live and who should die. It should be TO MEET neurons-the nerves that control move based not on how rich the patient and his ment-to deliver chemical messages from family are, but on whether the brain is COIDIITTEE ON GOVERNKENTAL AFFAIRS the brain to those muscles. ALB is usually a functioning and whether there is any expec Mr. BAKER. Mr. President. I ask disease of middle age and thereafter, and tation that the patient will continue to unanimous consent that the Commit more men than women seem to get it. It is enjoy what is truly life. tee on Governmental Mfairs be au not considered contagious. It is popularly This can best be done by a process that in thorized to meet during the session of known as Lou Gehrig's disease, because it volves the participation of the patient, the the Senate on Tuesday. September 11. killed the great baseball player while he was patient's family, a representative of the pa to consider the following nominations still in his thirties. There is no known cure. tient's religious affiliation, a representative for Associate Judge of the Superior I am now confined to a wheelchair, be of the community, and, of course, the medi cause my leg muscles are inadequate, and I cal profession-and ultimately, if the issue Court of the District of Columbia: need a ventilator to help me breathe, is not resolved, the judgment of a court. But Susan Holmes, Rufus King, Colleen though it uses only room air. The critical I believe that the criterion must be the abil Kollar-Kotelby. A. Noel Kramer, thing in keeping alive, in my estimation, is ity of the brain to function-for that is life, Emmett Sullivan. Robert Tignor, and to keep my mind in order and functioning. as distinguished from death. Even when Robert Richter. Fortunately, ALB does not seem to compro continuous excruciating pain is present, we The PRESIDING OFFICER. With mise the brain or the intellectual ability of have every reason to hope that advances in out objection. it is so ordered. the stricken individual. the control of pain may help us continue to When I received the news that I had this consider the functioning brain as the rule SELECr COMMITTEE ON INTELLIGENCE difficult disease after a long and active for life. Mr. BAKER. Mr. President. I ask career as a lawyer, Army officer, state attor Based upon what I have been through, I unanimous consent that the Select ney general, and a member of Congress, I have found that medical care is generally Committee on Intelligence be author could have been devastated and destroyed. administered with good intentions to those ized to meet during the session of the But I was not. I decided I would simply have with terminal illnesses, and that an atmos Senate on Tuesday. September 11. at 2 to make the best of it. Throughout my med phere of good will pervades medical offices ical experience, this philosophy has always and hospitals. I believe it is also fair to say p.m.. to receive a closed-session brief prevailed: that I had a job to do and a life to that the patient should have a lot to do ing on intelligence matters. finish, and that no physical obstacles could with the treatment, however limited it may The PRESIDING OFFICER. With stop me in the pursuit of what I considered be. For if he is cooperative, optimistic, and out objection. it is so ordered. to be my duty and responsibility to my communicative to the doctor and other COMMITTEE ON THE JUDICIARY people and my time. health professionals, he will inspire the Mr. BAKER. Mr. President, I ask Therefore, for patients with a so-called total medical staff, and this can have a lot unanimous consent that the Commit terminal illness like ALS, my message is to do with the results. this: We are all terminal and we are all A friend of mine, Norman Cousins, a dis tee on the Judiciary be authorized to going to die sometime. So why should a ter tinguished author and editor who suffered meet during the session of the Senate minal illness be different from a terminal some years ago from what he thought at on Tuesday, September 11, 1984, in life? There is no difference, and I would sug the time was a terminal illness, has given us order to receive testimony concerning gest that the most positive thought for any all a message in that respect. Humor was the FCC 7-7-7 Rule. patient is to concentrate on perpetuating the single factor that helped him most, and September 11, 1984 CONGRESSIONAL RECORD-SENATE 24783 he demonstrated that the patient can con Mr. Javits said the most important point grace of these infirmities;" Mr. Javits said. tribute as much as the doctor or the nurse in staying alive was to "keep my brain in "It was a vivid illustration of the psycholog to a happy outcome, and can make life order and functioning." He added, "This is ical impossibility for him, a handsome man much easier for the people who function the essence of life." with a vivid personality, to accept the limi within the health care or hospital setting. The disease has not affected Mr. Javits's tations that his disease imposed upon him." We have made a lot of progress in this mental abilities but it has led to striking The conference at which Mr. Javits ap country in the quality and the availability weakness of the muscles below his neck. He peared is known as medical grand rounds. In of health care, but we still have a long way wears a supportive collar to prevent his past decades, when medical costs were much to go. I am very proud of what we have head from sagging and thereby further lower than they are now, patients often done, especially because most of it is in the interfering with his ability to breathe. That stayed in the hospital so they could be private sector, which always gives greater difficulty, his doctors said, was due entirely present when their case was discussed.e freedom and greater opportunity to the in to the muscle weakness resulting from the dividual. I believe, too, that there is a grow damaged nerves. ing body of opinion in the health care pro KEEPS A FULL SCHEDULE THE REAL COST OF THE PHILIP fessions that has helped to move this proc ess on its way, and that this is an expression Although it takes him three hours in the A. HART SENATE OFFICE of social consciousness among the members morning to prepare for the day, Mr. Javits BUILDING said, he has written many articles, delivered of the health care professions. Though this EXECUTIVE SUlDlARY attitude is far from universal, I am sorry to commencement addresses, received awards say, it is nonetheless impressive and very and testified before his former colleagues in e Mr. JOHNSTON. Mr. President, the promising for the future. Congress about the need for more basic re press has carried so many stories Now a few observations on my own life as search in his disease and others. about the extravagance and exorbi a "sick man," which may be helpful to Mr. Javits said in an interview that his tant costs of the Hart Senate Office others carrying comparable serious disabil medical bills totaled "upward of $50,000 a Building that it has become conven ities. I do lecture, I do read, and I do write. I year," and that they were paid by three tional wisdom that the Hart Building dedicate my life to the issues that have health insurance pollees and from his own is among the costliest Federal build dominated it for many decades now, and to pocket. my profession as a lawyer. I believe that I Mr. Javits said he was upset when he ings ever built. The facts show other can still be useful in many ways. heard reports of remarks by Gov. Richard wise-the Hart Building's cost growth In short, life does not stop with terminal D. Lamm of Colorado recently, remarks was relatively modest compared with illness. Only the patient stops if he does not that he and others interpreted as "urging similar structures built in the same have the intellectual and moral wherewithal older people with terminal illness to get out period of high inflation. Its actual per to go forward with life until death overtakes of the way and leave medical care for square foot construction cost is far less him. That happens to everybody. We can be younger, more vital subjects." than many corporate headquarters inspired by our disabilities and carry on But Mr. Javits also said that he felt that what is truly life, or we can be dismayed and Governor Lamm had "raised a question for and other modem buildings and, when downed by them. the profession of deepest gravity; it is true discounted for inflation, substantially The greatest therapy is to forget about that medical care is very expensive." less than other congressional buildings terminal illness. Everybody is terminal. Mr. Javits went on to lament that Ameri such as the Rayburn House Office That is the great message that can perpet cans had not established a system to deliver Building, as a full report on the con uate the useful life of the patient and be of health care to all. struction cost has disclosed. solace and comfort to the patient's family URGES LIFE-OR-DEATH TEST and friends. what is really worthwhile in life FOUR ERRONEOUS ASSUMPTIONS ABOUT THE is the excitement and the expectation of He called on doctors to develop a test "to HART COST living, and the giving and the receiving, enable us to determine socially who should Four fundamental fallacies are at which is, after all, life's essence. live and die." Such a test, he asserted, the center of the public misconception should not be based on such factors as age of the high costs of Hart: First, Hart DOCTORS HEAR JAVITS IN A SALUTE TO LIFE and the name of the ailment, "but on whether your brain is functioning, and I be was originally estimated to cost $48 craft and weapons procurement are up 57.5 ciate Architect, John Carl Warnecke A Democratic-controlled congressional percent, whereas munitions, training, and & Associates, initiated numerous cost subcommittee has issued a critical report other non-hardware procurement are up savings measures, for example, substi claiming that the readiness of U.S. fighting 100.8 percent. The Army's budget demon tution plaster for much of the marble, forces has deteriorated under the Reagan strates that munitions training, and other Administration. This report was convenient procurement has risen faster than weapon aluminum for bronze, and so forth, ly issued during an election year and systems. Weapon systems rose 69 percent which ultimately saved in excess of became a major issue for the Mondale cam while munitions, training and spares $30 million in construction costs. paign. jumped 85.2 percent. Only in the Air Force Thus, Hart emerges as a balanced Obviously, the political spectrum from Re did weapon systems procurement outpace building, by no means opulent. publican to Democrat differs greatly on this munitions, training and spares-rising 268 FUNCTIONAL DESIGN APPRECIATED BY issue-mainly supporting what is considered percent as compared to 230.1 percent. Pay OCCUPANTS best for their respective candidates. But raises have also been accomplished to in what truth is there to this biased congres crease morale and reenlistment, and to im The time has come for the "Taj sional report? prove the caliber of today's recruits. Mahal" myth of the Hart Senate Those who have issued the report claim Granted, in election years, the state of the Office Building to die. The Hart Build that the Reagan Administration has devot military is always subject to debate by the ing should be appreciated for what it ed too much to high-priced hardware "ins" and the "outs" of the political commu is-a highly functional building com ships, tanks, planes, and missiles-while ig nity-but for a congressional group who has patible with the monumental architec noring ammunition, spare parts, fuel, equip argued continually for cuts, who has forced ture on the Hill, well liked by its occu ment maintenance, and training. Defense reductions, to lie to the American people pants, which had the misfortune of Secretary Caspar Weinberger has accused about the serious question of defense pre the House Appropriations Subcommittee on paredness only re-enforces the important being constructed in a period of un Defense of issuing a "dangerously wrong" gains the Reagan Administration has made precedented inflation. It should be study. in the U.S. defense posture against some judged on its true costs and function, To defuse the issue, independent analysis times overwhelming odds. Mr. Mondale was not on its political mythology.e is necessary. Major improvements have been part of an administration that cut the de made toward the ability of U.S. forces to fense priorities drastically-and should wage war today as compared to 1980, accord know the real truth behind the growth of MILITARY READINESS ing to people like Gen. David C. Jones defense readiness in this nation. Such politi e Mr. GOLDWATER. Mr. President, ria for any voter intent on making an may be delayed, either until proletarian rev In his first official statement upon assum olution ripens in Europe or until the coloni informed decision this fall. ing office, Konstantin Chernenko offered al revolutions come fully to a head, or final The thrust of the Mondale plan is "peaceful coexistence" to the United States, ly, until the capitalists fight among them right on target. The savings the plan thus raising the question once again of the selves over the division of the colonies. would achieve would be applied to def definiton of Soviet doctrinal terms. Therefore, the maintenance of peaceful re icit reduction. The whole story of this One aspect of peaceful coexistence has lations with the capitalist countries is an year in Congress and throughout the been arms control negotiations, which have obligatory task with us." 24786 CONGRESSIONAL RECORD-SENATE September 11, 1984 INEVITABLE WAR Soviet Communist Party, Marshall Rodion or an air force, to violate these provisions of "Peaceful coexistence" is therefore inevi Yakovlevich Maltnovski's speech contained the treaty on Soviet son, out of the sight of tably to end in War. Who will start this the following passage: "We must ... also Allied inspectors. It was in Von Seeckt's war? According to Lenin, "If war is waged study means of foiling the aggressive de Soviet training camps that the Luftwaffe by the proletariat after it has conquered the signs of the enemy by inflicting a lightning and the panzer divisions were born. bourgeoisie in its own country and is waged blow on him at the proper moment [svoyev The second German invasion is 1941 was with the object of strengthening and ex remennol" . Pravda tried to preceded by a massing of Soviet troops close tending socialism. such a war is legitimate put the cat back in the bag on Feb. 23, 1964, against the German-Soviet demarcation line and 'holy' " . by changing this to a "lightning blow in that was so alarming that Berlin cabled its "The Social Democrats [the old name of the return." But on Jan. 21, 1974, Richard Ivan ambassador, Count Werner von der Schu Communists] may even find themselves in ovich Kosolapov, now editor of Komunist, lenburg, in Moscow and asked if the USSR the position of having to demand agrressive wrote in Pravda that "constructive peaceful intended to attack. Von der Schulenburg re wars" . "We must coexistence . . . by no means signifies the plied that they did not, that it was just Sta say that the party congress commissions the termination of the class struggle in all its lin's idea of 300 percent security. Whatever Central Committee to denounce all peace forms ... :• Earlier, Marshal Vasili Danllo the facts about who was about to invade treaties and to declare war on every imperi vich Sokolovski, in his Voyennaya Strate whom, Moscow again seemed to be curiously alist state and on the whole world as soon as giya, 1968, p. 26, had asserted that the free of paranoia: following the war, the So the Central Committee regards the moment "highest form of class struggle" is "war be viets were even inducting surrendered SS as appropriate" East Germans to introduce military training ently it is not so dlsm.tssed in Moscow, how display a fascination with surprise attack, in the high schools, matching the militariza ever. Gen. Yevdokim Yegorovich Maltsev, but Maltnovsk's indiscretion, amended for tion of Soviet youth. writing in Krasnaya Zvezda on Feb. 14, foreign consumption, implies that surprise The notion that Moscow fears invasion by 1974, asserted that: even then was not easy to achieve-the the Germans or by any nation is in any case "The defense might of the USSR is grow "means" to achieve it had to be "studied.'' belted by the offensive deployment of its ing stronger on the basis of Leninist ideas Peace has therefore been due partly to west armies. Their ammunition dumps, for exam and on Lenin's doctrine on the defense of ern surveillance and intelligence networks, ple, are close to the border with the West, the socialist homeland. Wholly guided by which makes it almost impossible to prepare where they would be overrun in the first this doctrine, our party adopts a creative ap a first strike "lightning blow" on a scale suf few hours of a NATO attack. proach to the complex problems ficient to ensure victory. Over the years the USSR has howled of ... defense capability in strict conformi A Soviet attack would have to be on a abuse at purely defensive measures of the ty with the particular features of a given large, and hence detectable, scale because of western countries, probably striving to in stage of social development and the world the West's military strength. Western arma spire a numbing fear by advertising western situation. . . . Events of the present stage ments have therefore prevented the only measures that pre-suppose retreat. In the of social development are approaching the kind of war that assures victory to the ag 1950s, they pointed to the chambering of point where at any moment a situation may gressor. Nuclear weapons are part of that West German bridges to facilitate their arise in some link of the capitalist system strength. In the 1960s, Soviet military writ demolition in the path of the expected which will pave the way for revolutionary ers dismissed the idea that nuclear weapons Soviet advance and later the planting of nu transformations." changed the nature of war "as bourgeois clear mines in the passes of the Erzgebirge. Given Lenin's emphatically aggressive in ideologists assert." Such weapons were just Radio Moscow even denounced the sending tention and the abuse to which the word artillery of greater explosive force. of German Leopard tanks far away to "defense" has been subjected even by "bour But the increasing power and diversifica Spain, where they could hardly launch an geois" states, it would be unwise to take tion of nuclear weapons gave rise to doubts attack against the East, but could be used much comfort from its use here. As the and, recently, to admission of the possibility very easily to seal the gorges of the Py Sixth World Congress of the Comintern in that a great war might be fought without renees. The campaign against neutron weap 1928 put it: "There is no contradiction be using them at all. If, as Robert McNamara ons is the latest example. tween the Soviet government's preparations wrote in the fall 1983 issue of Foreign Af NUCLEAR WEAPONS for defense and for revolutionary war and a fairs, the sole purpose of a nuclear arsenal is to deter the adversary from using his ar If strategic nuclear weapons are militarily consistent peace policy. Revolutionary war useless as McNamara claims, why do not the of the proletarian dictatorship is but a con senal, then each arsenal cancels the other out, with the possible exception of small Soviets agree to their abolition, thus saving tinuation of revolutionary peace policy 'by enormous expense? Because they are of other means.' " tactical devices used in sparsely inhabited areas or at chokepoints like the Rhine cross enormous political use, as the Soviets began The continuing validity and immutability to realize in the 1960s, when the Communist of Leninist war doctrine is sometimes pro ings or the Pyrenees passes. But this en hances the possibility of war. Once nuclear Santiago Alvarez, writing in the World claimed in the USSR so sharply that one Marxist Review in June 1963, noted: might suspect that Soviet "doves" are fran weapons are swept from the chessboard, the Soviet proletariat may once again be able to "Acute political crises may give rise to rev tically trying to warn a bemused West that olutionary situations in the western coun it is in mortal peril. The idea that "peaceful "fulfill its international duty" across fron tiers, not in Afghanistan, but in Europe or tries. We have in mind such things as a coexistence" might be permanent has been sharp deterioration of international rela repeatedly denounced as "unscientific": "It the Middle East. The vast coventional arma ment of the USSR seems to indicate that its tions fraught with the danger of nuclear is clear that there can be no continuing, war.... It may well be that any immediate 'eternal' coexistence of socialist and capital leaders never gave up hope that convention al war might some day again be possible. danger of nuclear war would cause a ist states. To advance such a demand means leftward swing among the masses.... " to reduce the principle of peaceful coexist PAST INVASIONS He was echoed by Pravda on August 13 of ence to absurdity," wrote D. Aleksandrov in Why 42,600 tanks and 176 divisions ? A cur through highly publicized speeches, to pro Otnosheniya, XI, 1963. rently popular explanation is paranoia in voke the necessary terror with lurid visions "Peaceful coexistence" in Moscow's view is duced by past invasions, particularly by of accidental missile launchings caused by a therefore no more than a state of uneasy ar Germany. Let us examine these invasions. "flock of geese" trated nuclear nightmare, we must spend and American workers-many of them reminded Soviets that "The bourgeois-pact years educating the Soviets using all avail fist attitude toward war which stresses the able media on the apocalyptic doctrine of women and minority workers-have 'horrors of war' and inculcates hatred of all the Communist Party and on the superflu benefited measurably. The American wars is alien to us. Communists are against ity of the armaments that keeps them in Telephone Co., for example, reports impertallsttc wars as being counterrevolu unending poverty, even at the expense of that 85 percent of its nonmanagement tionary wars, but they are in favor of liber the latest trends in jazz and sports.e employees who earned degrees ating, anti-imperialist, revolutionary wars." thought AT&T's tuition assistance While suppressing at home films and liter program have moved into manage ature that dwell on the horrors of war, the EMPLOYEE EDUCATIONAL Soviet government encourages them abroad, ASSISTANCE EXTENSION ACT ment positions. on one occasion even lending troops of the e Mr. MOYNIHAN. Mr. President, I The employee educational assistance Czechoslovak army as extras in an Ameri rise today to speak about an important provisions of the Tax Code also have can television remake of Erich Maria Re and worthy proposal, the Employee been responsible for retaining many marque's classic AU Quiet on the Western Educational Assistance Extension Act, thousands of America's industrial Front. s. 249. workers. If we are to compete with our From the age of seven, Soviet children are This legislation would extend the trading partners, American industry given mtlltary tratntng; when I was in must retool and update its manufac Moscow, 15 million children took part in the employee educational assistance provi annual field maneuvers of the "Children's sions of the Internal Revenue Code of turing technology. This process leaves Army," also known as Zamitsa. 1954. In 1978, Congress opened the many unskilled workers ill-prepared CIVIL DEFENSE classroom door to thousands of Ameri for increasingly complex jobs. Section Many members of antinuclear groups in can workers by adding section 127 of 127 of the Tax Code has helped many the West are puzzled and worried by the the Tax Code and thereby providing of these workers to adapt to new tech vast Soviet civil defense program, which ap tax incentives for employers to pay for nology by learning new skills. In the pears to contradict their firmly held belief the further education of their employ end, this saves American jobs. Section that there is no effective defense against ees-regardless of whether or not that 127, then, has been an invaluable nuclear attack. Perhaps they are right, but education was, as under prior law, nar hedge against unemployement and, at they forget the political value of the Soviet rowly defined as job-related. the same time, has helped American civil defense program, which by instilling a business train American workers to probably false sense of security, immunizes Section 127 has provided new oppor the Soviet people against any spillover of tunities for the advancement of compete with foreign labor. the nuclear terror being drummed up women and minority workers, im Employee educational assistance is abroad. proved America's competitiveness, and also vital to our efforts to improve Bilateral nuclear disarmament will not contributed to the general enlight America's educational system. Just 1 take place until Moscow loses more domesti ment of the American public by en year ago, the President's Commission cally than it gains abroad by maintaining couraging employers to provide tax on Excellence in Education declared the nuclear threat. Discouraged by jamming that the Nation is "at risk" due to a and censorship from any serious attempt at free educational fringe benefits to educating Soviet public opinion, we have their employees. nationwide decline in educational contented ourselves with broadcasting jazz, Over 7 million employees have been standards. literary comment, politically uplifting hom able to further their educations and One answer, the Commission sug lies and the news. The great mass of Sovi improve their job skills as a result of gested, was to expand resources to im ets has no idea of the war doctrine of the the employee educational assistance prove the quality of teaching at all Communist Party, nor do even most Soviet provisions of the Tax Code. Because levels. The employee educational as officials know of the enormous preponder these provisions expired in December sistance incentive is important in this ance of Soviet conventional forces. It is surely evidence of neglect on the West's of 1983, employer-provided education effort, as it enables school systems and part that even Soviet negotiators must be al assistance, such as the payment of universities to offer teachers new op given the most elementary information by tuition, is no longer considered exclud portunities for intellectual growth. their western counter-parts on the strength able from an employee's income, Section 127 has enabled many under and deployment of their own armed forces. unless the employee takes courses that paid teachers to take courses they oth One representative of a Soviet bloc country are directly related to his job. S. 249, erwise would be unable to afford and once asked me, during a negotiation, for in of which I am proud to be a cosponsor, then bring what they learn to their formation on his own country's armed would extend these employee educa students and colleagues. forces. Noting my startled expression, he added, "Nothing secret .... just a maga tional assistance provisions and make Educational assistance benefits also zine article, ltk.e those in the U.S. News and them a permanent part of the Tax are an important tool to help educa World Report." Code. tional institutions attract quality WITHHOLDING INFORMATION Congress broadened the employee teachers. A school district or college There must be a good reason why the educational assistance incentives in which cannot provide their teachers Kremlin keeps such information from its 1978 because the prior requirement higher salaries may, still, be able to people and from its diplomats. If awareness that only assistance for job-related offer tax-free tuition assistance. The spreads that the USSR has about 29,000 courses could be excluded from em National Educational Association esti tanks more than "aggressive" NATO, the ployee income precluded many non- mates that almost 60 percent of all 24788 CONGRESSIONAL RECORD-SENATE September 11, 1984 school districts in my home State of understanding of the people of our granddaughters. She has been passing New York offer educational assistance Nation and the artistic skills they these deep traditions to others of 50 benefits to their teachers. value," she told us. years. In addition, the distinguished former Hers is a most worthwhile program Today Aunty Kau'i serves as a model Congressman John Brademas, now in support and recognition of folk art of purity and classicism for hundreds president of New York University, has in our national culture. "We have been of younger artists of all races and, informed me that some 70 percent of as unbureaucratic as a Federal agency indeed, from other parts of the world. NYU graduate and teaching assistants can be in making guidelines for nomi During World War II she was asked to have received some sort of tuition as nations for these fellowships," she teach the hula to servicemen and sistance under section 127, assistance wrote. "They are no forms. Any citizen women in order to provide recreational which will no longer be available to at can send in a nomination. The evalua release. She recalls instructing at all tract talented scholars unless Congress tion process is rigorous, but we have the military posts on Oahu, including extends section 127. left the door open to all the keepers of Pearl Harbor, and sometimes had as Mr. President, the educational assist American folk traditions.'' many as 500 in a class. ance benefits provided under section The representative of my own State Learning the hula was a natural ex 127 of the Tax Code not only contrib among those honored this year is the tension of her early life, a life steeped. ute to American commerce, they also "kumu hula" or Hawaiian dance in Hawaiian cultural tradition. Her are vital for an informed and enlight teacher affectionately known as Aunty grandfather, a teacher of Hawaiiana, ened American public. Thomas Jeffer Kau'i. Some of us may have seen her and her grandmother, a local author son, as ever, was right to observe that perform the traditional hula of the ity in herbal Hawaiian medicine, American liberty depends on an edu Hawaiian, together with her daughter trained her to read the Bible in Hawai cated electorate. In 1816, Jefferson Noenoe and granddaughter Hauoliona ian. Now at 75 she continues to pro warned: "If a nation expects to be ig lani, on the National Mall earlier this vide continuity in the preservation of norant and free, in a state of civiliza summer as participants in the 18th Hawaiian cultural tradition and young tion, it expects what never was and Annual Festival of American Folklife people consider the opportunity to never will be." staged by the Smithsonian Institution. study under her to be a rare privilege, Educational opportunity has been a No one fortunate enough to have wit as indeed it is. national priority since Jefferson's nessed those three generations of Ms. Hawes observed of the 1984 folk days. Section 127 of the Tax Code has women perform with rare grace and arts fellows: "In a larger sense we did provided women and minorities in par beauty could come away without a not choose them; they have used their ticular a chance to learn and advance new appreciation of Hawaiian hula. lives to choose creativity, beauty and which earlier they often could not Most of us are accustomed to "hula quality and it was that life process afford. Section 127 has helped improve auwana" or modem hula, accompanied which recommended them to this cele the quality of American managers and by languid-sounding music. In contrast bration of artistry in American life.'' teachers and assisted countless Ameri "hula kahiko" or traditional hula is The artistry of "Aunty Kau'I" Zut can workers to secure the skills they much more forceful and performed termeister is an outstanding reason need in this new age of high technolo often to a drumbeat sound and an why it is a great privilege for me to gy. And this, Mr. President, provides almost mesmerizing chant. represent the vastly gifted Hawaiian our Nation with a better informed citi Aunty Kau'i, born Emily Kau'i-o people of our Aloha State in this zenry. makawelina -lanio- kamano'okalanipo Chamber, Mr. President. · I urge my colleagues to support S. on the island of Oahu in 1908, was 249, to extend tax-free educational as among five people, all women, identi sistance to working Americans.e fied by the Bernice P. Bishop Museum ORDERS FOR WEDNESDAY in 1970 as "Loea hula," or experts in ORDER FOR RECESS UNTIL 10 A.M., FOR THE REC the traditional hula; of the five only AUNTY OGNITION OF CERTAIN SENATORS, AND DESIG KAU'I AND HULA AS Mrs. Emily Zuttermeister is still active NATING PERIOD FOR TRANSACTION OF ROUTINE FOLK ART in its performance and instruction. MORNING BUSINESS Mr. MATSUNAGA. Mr. President, it She is of Hawaiian descent and her Mr. BAKER. Mr. President, I ask was my privilege last Thursday to parents, following the Hawaiian unanimous consent that when the attend a Capitol reception to honor 17 "hanai" practice of the time, gave her Senate completes its business today it distinguished American folk artists, to her maternal grandparents to raise. stand in recess until the hour of 10 winners of the Third Annual National Thus she grew up surrounded by old a.m. tomorrow; that after the recogni Heritage Fellowships sponsored by the Hawaiian custom. Her uncle, Sam Pua tion of the two leaders under the National Endowment for the Arts. I Ha'aheo, a police officer and elder of standing orders there be special orders can report to my colleagues that it was his church, also held the traditional in favor of the following Senators: a richly awarding event to meet such position of "lawai'a kilo" or fish spot Senators QUAYLE, MURKOWSKI, STEN talented artists in many fields repre ter who stands on a high place and di NIS, NUNN, and PROXMIRE for not to senting 13 States, 6 of them new to rects the fishing boat. He kept his exceed 15 minutes each, to be followed the Endowment's Folk Arts Program knowledge of the hula and the ancient by a period for the transaction of rou including my own. The 1984 fellows chants secret until he was an old man. tine morning business until 11:30 a.m., join 31 others recognized in the previ In 1933, he decided it was time to in which Senators may speak for not ous 2 years. Arts Endowment Chair pass on this knowledge. He opened a more than 5 minutes each. man Frank Hodsoll observed that "hula halau" or hula house on the The PRESIDING OFFICER